Royal Bank Spikes Mortgage Rates
Written by: Condo Chicks
Posted on: November 15, 2016
Let’s take a look at those new mortgage rates, Toronto! With RBC, we wish we had better news for homeowners and their mortgage rates, however unfortunately an increase is set to be taking affect on November 17, 2016, that will make paying down your mortgage even more expensive for homeowners.
The Royal Bank of Canada will be raising their rates and the numbers are ranging from 25-40 basis points overall – one basis point equaling 1/100th of a percent. Those borrowing with amortizations of under 25 years will pay 2.69 per cent making it an increase of 25 basis points, a four-year rate jumping to 2.79 per cent which increases by 30 points, and the five-year to 2.94 per cent which is also up 30 points, respectively.
Those opting to take 25 years or more to pay down their mortgage will be affected with even high increases. Rates for homeowners with the three-year term at 2.79 per cent, four-year term at 2.89 per cent and five-year term at 3.04 per cent, this increases the mortgage rates by 35, 40 and 40 basis points, respectively.
Royal Bank of Canada said it takes a number of factors into account when making changes to mortgage rates, including funding costs and market conditions.
“Based on current conditions, our rates reflect the right balance between our clients’ expectations and our costs of funding mortgages,” Mary Ellen Brown, Royal Bank’s senior vice-president of home equity financing, said in a statement.
This mortgage rate increase is predicted to affect the housing market. Higher mortgage rates are likely to assist in cooling down our hot market, which affects new loan formations for the banks, and with that, these financial institutions will also earn better margins across their lending portfolios, and hopefully re-balance Canada’s high-profile market.
So what is the cause of this upcoming increase from The Royal Bank of Canada? A few factors come into play as RBC raises their mortgage interest rates. Following last months’ mortgage rule change of higher qualifying rates for mortgages with down payments of less than 20 per cent, Banks find themselves feeling the heat of the Federal Government’s crackdown on Canada’s rising housing Market.
More recently, following President-Elect, Donald Trumps victory in the United States, the give-year Government of Canada bond yield, which is used as a benchmark for mortgages, jumped 21 basis points to 0.96 per cent last Tuesday. The sudden spike hit banks with higher borrowing costs. Where borrowing costs rise, the increase then gets passed along to customers who take out new loans, putting new home buyers, and home owners renewing their current mortgage at a disadvantage.