RBC Royal Bank will increase rates on fixed mortgages and charge higher rates for mortgages with an amortization period of more than 25 years.
As of Nov. 17, the special offers rate on a five-year fixed mortgage will rise to 2.94% from 2.64%. And the rate on a three-year fixed mortgage will increase to 2.69% from 2.44%.
|Term||Current special offers rate||Special offers rate as of Nov. 17|
The bank will also begin charging 10 additional basis points for mortgages with an amortization period of more than 25 years starting on Thursday.
|Term||25-year amortization or less||Greater than 25-year amortization|
“We consider a number of factors when making changes to mortgage rates, including our funding costs and market conditions,” says Mary Ellen Brown, senior vice-president, home equity financing. “Based on current conditions, our rates reflect the right balance between our clients’ expectations and our costs of funding mortgages.”
For someone buying a $762,975 home (the average home price in Toronto), their mortgage costs will increase slightly. If a buyer puts down 20% and has a five-year fixed mortgage with a 25-year amortization, their monthly payment will be $2,870—an increase of $93. The buyer will pay $8,423 more interest over the five-year term and have $3,055 more owing at the end of the term.
On the same priced home with the same 20% down payment and a five-year fixed mortgage but with a 30-year amortization, the monthly payment will be $2,580—a $128 increase. The buyer will pay an additional $11,671 in interest over the five-year term and owe an extra $3,982 at the end of the term.
The rate increase comes as new mortgage rules have come into effect and bond yields have jumped. “Bond markets have interpreted a Trump win as one that will make inflation if not great again then at least rise again,” says TD Economics. “The jump up in yields has been largely driven by increased inflation expectations.”
When the yield on five-year Government of Canada bonds climbs, fixed-rate mortgages also usually rise and vice versa. Over the past week, the yield on five-year government bonds has risen 21 basis points to 0.96%.