Royal Bank is following TD Bank’s lead in upping some of their mortgage rates.
As the bond markets continues to fall, and yields continue to rise, funding mortgages are becoming more costly for banks and those increased costs are being pushed on to home buyers.
Royal Bank announced Tuesday morning that the increase in their listed rates for a 5-year, and 25-year amortization home mortgage will be a full 30 basis points from 2.64% to 2.94%.
The Bank also announced a hike in their three and four year mortgages to 2.69 and 2.74% respectively.
And if you go out even further than a 25-year amortization, then 5-year mortgage rates go up even more, rising 40 basis points.
This whole rejigging of mortgage rates is a reaction to bond yields rising as the banks traditionally use the benchmark 5-year government bond to set rates.
In Canada, the 5-year bond rate has jumped 21 basis points just since Donald Trump won the election, and it’s expected that these rates could even go higher as inflation comes back into the market, pushing interest rates in the U.S. to new loftier levels, with Canada certainly following suit.
The big winner in this rejigging of rates will be the Canadian banks, who will reap more profits from widening spreads, and the consumer who will see higher rates somewhat cool the Canadian housing market.