The
Royal Bank of Canada announced Friday it's hiking interest rates on mortgages,
in a move that could signal that rates for home loans have passed their bottom.
A
five-year, closed rate offer at RBC will now go for 3.29 per cent, still very
low by historical standards but higher than the 3.09 per cent rate the bank had
been offering.
On
a $400,000 mortgage, that's a difference of some $42 per month, assuming a
25-year mortgage.
RBC's
move makes it likely that mortgage rates will rise at other Canadian lenders,
as Canada's big banks tend to follow one another on interest rates.
The
Globe and Mail reports that RBC is making the move because it is seeing its own
borrowing costs rising, thanks to rising costs on the bond markets, which are
closely tied to what banks can charge for fixed-rate mortgages.
If
that's the case, other lenders will likely have to follow suit, as they have
similar borrowing costs.
While
rising rates may be bad news for homeowners and prospective buyers, they will
likely be welcomed by Finance Minister Jim Flaherty, whose concern that low
interest rates are overheating Canada's housing market has become so intense
that he actually placed a call to Manulife Bank of Canada in March, asking them
to rescind a discount 2.89-per-cent mortgage offer.
(Flaherty
seemed not to notice that plenty of mortgage brokers around Canada are offering
rates even below 2.89 per cent.)
If
the banks are raising rates, they likely won't raise them very far, as the Bank
of Canada sets the overnight lending rate that guides borrowing costs in
Canada, and the bank isn't expected to raise rates before the second half of
2014.
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