Royal Bank of Canada, the country’s largest mortgage lender, is raising its rates and analysts say other banks are likely to follow suit, leaving the threat of a mortgage rate war firmly in the past. The special rate on RBC’s four-year closed mortgages will now rise 10 basis points, to 3.09 per cent, while its five-year special rate will rise 20 basis points to 3.29 per cent. (A basis point is 1/100th of a percentage point.) MORE RELATED TO THIS STORY SURVEY Commercial real estate players anxious about market Ottawa’s retreat from mortgage market sends CMHC insurance sales tumbling Toronto home sales fall in May but prices still rising HOUSING Video: Why families faced foreclosure without ever missing mortgage payments MARKET VIEW Video: Market View: U.S. housing recovery gathers steam as Canada cools ECONOMY Video: U.S. home prices: up up and away? The posted rate on a one-year mortgage is going up fourteen basis points to 3.14 per cent, while the posted rates on two- and three-year mortgages are each rising by 10 basis points, to 3.14 and 3.65 per cent respectively. The new prices take effect June 10. Mortgage rates became a major point of contention earlier this year when some lenders ratcheted theirs down to all-time lows, and received a scolding for doing so from Finance Minister Jim Flaherty, who has been trying to cool off the housing market. When Manulife Bank cut its posted rate on five-year fixed-rate mortgages to 2.89 per cent in March it received an angry phone call from Mr. Flaherty’s office and quickly pumped its rate back up to 3.09 per cent. Bank of Montreal allowed a special rate of 2.99 per cent to expire amid the controversy. At an event in Halifax on Thursday Mr. Flaherty said the banks are now being very "prudent in not reducing their rates." But with the spring selling season coming to a close, it’s looking more likely that long-term interest rates are going up. Royal Bank, which often changes its mortgage rates before the other banks do, said Friday its rates will rise. Long-term interest rates, specifically the movements of five-year Government of Canada bonds, are one of the factors that determine how much the banks have to pay for the money that they lend out to mortgage borrowers. The yield on five-year bonds was 1.44 per cent Thursday, compared to 1.30 at the end of March.
Posted on: Tue, 11 Jun 2013 20:38:28 +0000