Alberta Venture - - The Money Book -

Higher bond yields not only af­fect bond­hold­ers and the or­ga­ni­za­tions bor­row­ing the funds; con­sumers ex­pe­ri­ence the rip­ple ef­fect of lower bond val­ues, too. As fi­nan­cial in­sti­tu­tions op­er­at­ing on bonds are forced to with­stand ris­ing yields, these ad­di­tional costs are passed on to con­sumers. The Royal Bank of Canada and Toronto Do­min­ion Bank have al­ready raised mort­gage rates. For in­stance, RBC in­creased the rate from 2.64 per cent to 3.04 per cent on a five-year fixed term with a more than 25-year amor­ti­za­tion. In a press re­lease, RBC cited higher fi­nanc­ing cost as the ex­pla­na­tion for the in­crease. “Based on cur­rent con­di­tions, our rates re­flect the right bal­ance be­tween our clients’ ex­pec­ta­tions and our costs of fund­ing mort­gages,” said Mary Ellen Brown, se­nior vice-pres­i­dent of RBC’s home eq­uity fi­nanc­ing di­vi­sion. Pel­letier finds this most con­cern­ing as Canada has the high­est house­hold debt ra­tio of the G7 coun­tries. In 2014, the av­er­age Cana­dian had 166.1 per cent debt rel­a­tive to their in­come. “Cor­po­rately and per­son­ally, we have an affin­ity for debt,” Pel­letier says. “Oil prices are down and in­ter­est rates are start­ing to creep up. That’s not a good sit­u­a­tion for the coun­try or the prov­ince.”

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