RBC’s move to hike mortgage rates is now putting the spotlight on other banks and whether they will follow suit.
On the Canadian average home price of roughly $456,000, the hike on the five-year variable rate is going from 2.45 per cent to 2.6, which works out to an increase of $35 a month, $408 a year and around $10,000 over 25 years.
The hike on the fixed rate for five years will be 3.04 per cent from 2.94, which works out to $23 a month, $276 a year and $6,900 over 25 years.
Ratesupermarket.ca Editor Penelope Graham said RBC is bucking the trend with the move and the big question will be what other banks do.
“I would not be surprised if the other banks followed suit and RBC has a precedent of being the first out of the gate when making a move with their pricing,” Graham said.
As for the reasons behind the move, Graham points to the low loonie and oil prices, as well as new banking regulations which will take place this year and next.
“That’s actually going to increase the cost for funding mortgages for the banks, so this could be seen as an attempt to pad their profit margins before they have to take those losses later on,” she said.
Graham said the biggest takeaway for consumers is to shop around.
“If you are on the hunt for a new mortgage or your mortgage is coming up for renewal, you’re doing yourself a huge disservice if you’re not aware of the options available on the market,” she said.
Calgary Real Estate Board Chief Economist Ann-Marie Lurie agrees.
“There are many lenders out there so just doing your due diligence and seeing what types of rates are available, understanding all of your mortgage terms,” Lurie said.
As for new home sales, Lurie said there’s still a lot to see with other banks.
“It really comes down to how many other lenders in the market will also be doing this,” she said.