Canadians are now paying $100 more per month just to live, because of Donald Trump.
RBC sets new course on mortgage rates
Under pricing pressure from spiking bond yields and Ottawa's housing market crackdown, Royal Bank of Canada is boosting its most important fixed-rate mortgages.
RBC is also introducing a new pricing structure, charging different rates for mortgages with amortization periods of 25 years or less and for those with longer maturities -- a first for Canada.
Starting November 17, a new RBC five-year mortgage with an amortization period of 25 years or less will cost 2.94 per cent, up from 2.64 per cent, an 11 per cent jump. The bank also increased its three-year and four-year rates for these mortgages to 2.69 per cent and 2.79 per cent, respectively.
For mortgages with amortization periods longer than 25 years, the rates climb even more quickly. The annual cost of a five-year mortgage of this length will rise 40 basis points – a basis point is 1/100th of a percentage point – to 3.04 per cent.
As the banks wrestle with these rules, bond yields have also started spiking. Since Donald Trump was elected president of the United States last Tuesday, the five-year Government of Canada bond yield, which is used as a benchmark for mortgages, jumped 21 basis points to 0.96 per cent.
The sudden spike affects banks because their mortgages earn a spread off of the five-year benchmark rate. Whenever their borrowing costs rise, they pass the increase along to customers who take out new loans.
Because Ottawa is changing the rules, rate hikes were "to be expected," explained James Laird, co-founder of rate comparison site RateHub.ca. But spiking bond yields have added even more urgency. "That's the most fundamental reason to change mortgage rates," he added.
Ratehub calculates that for a $400,000 mortgage amortized over 25 years, RBC's new rate will increase monthly payments by $60.
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RBC sets new course on mortgage rates
Under pricing pressure from spiking bond yields and Ottawa's housing market crackdown, Royal Bank of Canada is boosting its most important fixed-rate mortgages.
RBC is also introducing a new pricing structure, charging different rates for mortgages with amortization periods of 25 years or less and for those with longer maturities -- a first for Canada.
Starting November 17, a new RBC five-year mortgage with an amortization period of 25 years or less will cost 2.94 per cent, up from 2.64 per cent, an 11 per cent jump. The bank also increased its three-year and four-year rates for these mortgages to 2.69 per cent and 2.79 per cent, respectively.
For mortgages with amortization periods longer than 25 years, the rates climb even more quickly. The annual cost of a five-year mortgage of this length will rise 40 basis points – a basis point is 1/100th of a percentage point – to 3.04 per cent.
As the banks wrestle with these rules, bond yields have also started spiking. Since Donald Trump was elected president of the United States last Tuesday, the five-year Government of Canada bond yield, which is used as a benchmark for mortgages, jumped 21 basis points to 0.96 per cent.
The sudden spike affects banks because their mortgages earn a spread off of the five-year benchmark rate. Whenever their borrowing costs rise, they pass the increase along to customers who take out new loans.
Because Ottawa is changing the rules, rate hikes were "to be expected," explained James Laird, co-founder of rate comparison site RateHub.ca. But spiking bond yields have added even more urgency. "That's the most fundamental reason to change mortgage rates," he added.
Ratehub calculates that for a $400,000 mortgage amortized over 25 years, RBC's new rate will increase monthly payments by $60.
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