RBC mortgage rate increase by another 0.25%

[gwasser]

I just watched BNN at my daughter`s where a broker from Mortgage Intelligence was interviewed. When I came home I saw RBC hikes mortgage rates again
What is going on?

I think 2 things: 5 year bond yields are rising on expectation of an improving economy and large government debt.
Canadian Banks want to take advantage of the high demand for houses in areas with the new HST. Since those areas include Vancouver and Toronto, this demand for mortgages, especially 5 year mortgages is extremely high.

If one sticks with variable rate for now, the favorite of many REIN investors, then you should do fine. I also noted that in markets such as Calgary, in spite of overall increasing prices, the condo market is stuck in a rut. Especially in NE Calgary where you can buy townhouses as low as $175K.

I bet that investment opportunities in Vancouver and Toronto will be increasingly difficult to find until the HST has been implemented. But that in many other places we still get excellent investment deals.

 

[Rickson9]

As already mentioned, fixed rate mortgages are related to the Government of Canada bond of the same maturity. The 5 year bond has been rising recently (up 55 basis points in a month) so it should be no surprise that the banks are raising their closed fixed-rate mortgage rates by roughly the same amount.

The spread between fixed and variable is widening since short term rates haven`t moved in a long time. All this means is that if the spread continues, more and more home buyers will simply choose variable rate mortgages over closed fixed rate mortgages.

Nobody was surprised in the rise in closed fixed rate mortgages. The bond market has been baking (and continues to bake) this information into the economy for months.

Some say that new homeowers, who opt for variable rate mortgages today will eventually be stuck between a rising variable rate (once Carney gets them moving) and a jacked up closed fixed rate tomorrow. The analogy I`ve heard is a lobster in a slow boiling pot. If somebody as dumb as I can figure this out, it means that a million others have figured this out, including the BoC.

The outcome of what happens when the BoC starts the short-term rate moving upward is opaque to everybody and probably depends on how fast the rates are raised, how wide the spread is at that time, and a hundred other things that I forgot to mention.

 

[lilbuffet]

after much debate and talking to alot of real estate investors I have selected to remain variable....i dont think rates can rise too much up here and not down in the states. I think the currency will appreciate much more up here than people would want if the rates dont move down south