With the Royal Bank of Canada’s announcement of mortgage rate hikes that are set to take place this Friday (January 8), a similar rise in interest from local banks might follow, according to a renowned consumer financial expert.
In the Wednesday (January 6) edition of his column at The Globe and Mail, Rob Carrick noted that the RBC’s plan to increase the lending costs on fixed-rate mortgages will put lenders in a bind. This is because lenders are already dealing with greater costs in mortgage financing following the implementation of new market rules last year.
The RBC will add 0.1 per cent to the borrowing costs of two- to five-year term fixed-rate mortgages. According to Carrick, a similar move might prove attractive to lenders as they are already paying higher prices on their lending capital.
Such a step could mean the end of five-year stable fixed rates for local bank transactions with rates below 3 per cent, Carrick warned.
The announcement had similar effects on other loan types.
“Variable-rate mortgages are losing some of their appeal,” Carrick said. “In addition to raising costs on fixed-rate mortgages, RBC announced that the special offer on its five-year variable-rate mortgage will move to prime minus 0.1 from prime minus 0.25.”
All is not lost for owners and prospective buyers, Carrick assured. “There are lots of alternative mortgage lenders that undercut the banks on rates and, almost as importantly, offer much less onerous penalties if you have to break a mortgage before it matures.”
“Also, you don’t have to negotiate with these lenders. There’s no need to get a line of credit or bring your investments over to get the best rate on a mortgage,” Carrick said.
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