MORTGAGE RATES UP AT ALL ‘ BIG SIX’ BANKS
TORONTO• The“Big Six” Canadian banks have now all hiked mortgage rates ahead of a Bank of Canada policy announcement on Wednesday.
Bank of Montreal and National Bank of Canada became the latest to do so Tuesday, with both raising their posted five- year, fixedrate mortgage rates to 5.14 per cent from 4.99 per cent, among other changes.
AB MO spokesperson said its rate changes “reflect the current competitive environment, cost of funds and other market considerations.”
The moves followed rate hikes last week by Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto- Dominion Bank, which variously cited “recent activity by competitors,” “market conditions,” and “Bank of Canada rate changes” as some of the factors that are considered as part of an increase.
Bank of Nova Scotia, meanwhile, lifted some rates effective Monday, including hiking its posted five- year fixed- rate mortgage rate to 5.14 per cent from 4.99 per cent. The lender also boosted its one-year, two-year, threeyear, four- year, seven- year, and 10- year fixed- rate mortgages by 20 basis points.
“Our No. 1 focus is providing value for our customers — we manage our pricing very actively to do just that,” said Scotiabank spokesman Lukas Gerber on Monday in an email. “We use a variety of market benchmarks to set rates.”
The Bank of Canada is set to make its next policy announcement on Wednesday, with the potential for a hike to its key interest rate having risen in recent weeks thanks to strong economic data.
While the rate hikes by the Big Six will affect consumers, they may also have an influence on a key central bank statistic which has become more relevant since new rules for uninsured mortgages came into effect at the start of January.
Those changes include a new “stress test” homebuyers must pass to qualify for an uninsured mortgage, with the cut- off set at either the Bank of Canada’s five- year benchmark rate or the contractual rate plus 200 basis points, whichever is greater.
The rate hikes from the Big Six could affect the Bank of Canada’s benchmark rate and, therefore, the threshold would- be homebuyers must meet to qualify for an uninsured mortgage. The central bank calculates its fiveyear rate “based on the statistical mode of the posted five- year rates of the six largest banks,” a spokesperson said in an email.
“As such, any change in the posted five-year rate of any of the six largest banks has the potential to change the mode, and thus the rate published by the Bank of Canada,” said the BoC’s Rebecca Ryall.
As of Jan. 10, the Bank of Canada’s five-year mortgage rate stood at 4.99 per cent. However, of the Big Six, only CIBC has a posted five- year fixed- rate lower than 5.14 per cent, having raised it last week to 4.99 per cent.
National Bank Financial analyst Gabriel Dechaine said last week in a note on the banks that the majority of outstanding mortgage debt is made up of fixed-rate loans, “of which we believe the majority has five- year terms.”
Dechaine also noted that another rate hike could provide a boost to bank margins.
“2017 provided not only surprise rate increases from the Bank of Canada, but a steady increase in the key five- year benchmark bond yield,” he wrote. “Both trends have contributed to an early turnaround in the trend of shrinking bank margins.”
Laurentian Bank of Canada — which is not considered one of the Big Six — also hiked its five- year fixed mortgage rate Tuesday by 15 basis points, to 5.14 per cent. The Montreal- based lender added another 15 basis points to its four- year fixed loan, to 4.24 per cent, as well as increasing the seven- year and 10-year rates by 10 basis points.
“These changes reflect an increase in the cost of funds and are in line with the rates offered by the market,” Laurentian spokesperson Benjamin Cerantola said in an email.