TD Rate Hike Signals Industry Shift: Brokers
In a written release, TD Canada Trust announced that it would increase most of its fixed-term mortgage rates anywhere from 20 to 35 basis points, effective Tuesday. The lender pointed to rising bond yields and a subsequent increase in the cost of funds.
Outside of rates for its six-month convertible and one-year mortgages, all of TD’s fixed-rate product will be subject to the adjustment. Terms of five to 10 years will see the biggest increase, climbing 0.35 percentage points starting Tuesday.
The posted rate for one of the most popular mortgages – the five-year closed – is set to rise to 5.69%, while one-year, three-year and four-year terms will see a more-modest 0.2-percentage-point increase. Two-year terms go up by 0.3 percentage points.
Canada’s other big banks are expected to follow suit over the next 24 to 48 hours, said analysts Monday, pointing to industry trends. The fixed rates at Canada’s non-bank lenders – also subject to the vagaries of the bond markets – are likely see the same changes, although the adjustments are likely to trail behind the Big Five.
That delayed reaction may accrue to the benefit of those hold-out lenders, as brokers focus in on rates ahead of the Central Bank increase expected in July.
“I will go to the lender with lowest rate,” Michelle Brienza, an agent with Toronto’s Lending Logic Financial, told MortgageBrokerNews.ca within hours of the TD announcement. “I think that those lenders who are able to hold off on raising their rates the longest over the next 24 to 48 house will get an influx of mortgage deals.”
Mortgage lenders are now studying what if any rate changes they’ll have to make.
“We are also looking at our rates,” Ron Swift, president of MCAP Service Corporation. “The bond yields have risen… we do not know if any other mono-lines will see this as a short term opportunity…like everyone else we always need to balance volume with profitability.”
Canadian bank are forecasting as much as a 100-basis point increase in 5-year bond yields over the next two years, making for a corresponding hike in fixed-rates mortgages over that same period.