Banks jump gun on rate increase
At least four major banks have jumped the gun on mortgage rate increases as the Bank of Canada apparently prepares to pull the trigger on a rate hike this week.
The Royal Bank of Canada has boosted all its fixed-term mortgage rates by 20 basis points, with the two-year rate up to 2.54 per cent, the three-year rate to 2.84 per cent and five-year rates rising to 2.84 er cent. All rates are for fixed-term products with amortization periods not exceeding 25 years.
The Bank of Montreal and CIBC have also hiked some of their mortgage rates — a move that comes as the market is widely anticipating an increase July 12 in the key benchmark rate set by the Bank of Canada.
BMO increased its rates on both its five-year fixed and five-year "smart fixed" mortgages by 20 basis points, bringing them to 2.89 per cent and 2.79 per cent respectively, when based on a 25-year amortization period. The bank also hiked its three-year mortgage rate to 2.64 per cent, an increase of 10 basis points.
CIBC has raised its mortgage rates by between five and 15 basis points.
The rate posted for a five-year fixed mortgage was 4.79 per cent.
"This change in rates reflects many factors, including funding costs and market conditions," a statement from CIBC said.
Toronto Dominion bank also increased some rates.
Banks are facing increased borrowing costs on bond markets as bond yields spike.
The hikes come in anticipation that the Bank of Canada will boost its trend-setting overnight rate on Wednesday. If the central bank does so, it will be the first time in seven years.
The Bank of Canada's target for the overnight rate currently sits at 0.5 per cent, with the market widely expecting a 25 basis point increase.