TD Bank raises 5 year posted mortgage rate, Royal Bank also upping rate

TORONTO – Two of Canada’s biggest banks are raising their benchmark mortgage rates.

Royal Bank of Canada said Friday it plans to raise its posted rate for a five-year fixed-rate mortgage on Monday to 5.34 per cent compared with the 5.14 per cent currently posted.

The increase follows a move by Toronto-Dominion Bank on Wednesday to increase its posted rate for a five-year fixed mortgage to 5.59 per cent from 5.14 per cent, as well as its other fixed rates by between 10 and 15 basis points.

Royal Bank spokesman AJ Goodman said the bank considers various factors when changing mortgage rates “including our funding costs and market conditions.”

“Based on current conditions, our rates reflect the right balance between our clients’ expectations and our costs of funding mortgages,” he said in an email.

The increases come as government bond yields rise, with the yield on the Government of Canada benchmark five-year bond rising to 2.18 per cent on Wednesday. Fixed-rate mortgages tend to move with government bond yields of a similar term, reflecting the change in borrowing costs.

Mortgage planner and rate comparison website founder Robert McLister said the TD Bank increase is “unusual” as the benchmark posted rate for five-year fixed mortgages hasn’t seen a jump of 45 basis points or more since March 2010.

Funding costs for the banks have gone up, and banks may be trying to recapture some of its profitability, he said. “But that alone does not justify a 45 basis point hike,” McLister said.

TD spokeswoman Julie Bellissimo said factors considered when determining rates include “competitive landscape, the cost of lending and managing risk.”

“Adjusting our rates is not a decision we take lightly…. Even with this change, lending rates remain competitive and at historically low levels,” she said in an email.

TD also increased its posted closed rates for two-year, three-year mortgage by 10 points each to 3.44 per cent and 3.59 per cent, respectively. TD increased its six-year and seven-year mortgages by 50 points each to 5.64 per cent and 5.8 per cent, respectively.

RBC will be increasing its posted rates for one-to-four year fixed mortgages by 15 basis points, to between 3.49 per cent to 5.04 per cent. Canada’s largest lender is also increasing its posted rates for its five-to-ten year fixed mortgages by 20 basis points, with the seven-year rate and 10-year rates increasing to 5.8 per cent and 6.6 per cent, respectively.

However, RBC said it will reduce its offered rate for a five-year variable closed mortgage to 3.3 per cent from 3.45 per cent on Monday.

TD cut its five-year variable closed rate offering for new and renewed mortgages earlier this month to 2.85 per cent which is 75 basis points less than its TD Mortgage Prime Rate.

Previously it was 2.95 per cent, or 65 basis points less than its TD Mortgage Prime Rate.

The rate changes were not universal across the Canadian banking sector.

Bank of Nova Scotia spokesman Lukas Gerber said Friday the lender has not increased its posted mortgage rates since January but “cannot elaborate on pricing changes we might be considering.”

A CIBC spokesman also said there were no changes to its posted mortgage rates.

McLister said the actual rates banks offer to borrowers are not seeing the same increase, but notes the Bank of Canada uses the posted rates at the big banks to calculate the rate used in stress tests to determine whether homebuyers qualify for loans.

Homebuyers with less than 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five-year mortgage rate, which was posted at 5.14 per cent on Wednesday. And as of Jan. 1, homebuyers who don’t need mortgage insurance must prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the central bank’s five-year benchmark rate.

Nearly half of all existing mortgages in Canada will need to be renewed this year, according to a CIBC Capital Markets report released earlier this month.


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