Banks start interest rate shake-up

Banks start interest rate shake-up

Four big banks have increased their posted rates on fixed mortgages, signaling the start of an upward move on record-low interest rates.

Royal Bank, TD Canada Trust and Laurentian all moved their posted rates on five-year fixed mortgages by 0.6 per cent yesterday, a move followed by CIBC today. Many non-banks have already followed, prompting a surge in requests from variable-rate clients to lock into fixed rates.

"The phones have been ringing off the hook since yesterday," said Donna Ramsay, a Mortgage Architects broker based in Orangeville, Ont. "We have several clients that we have committed to calling to see if they want to lock into a fixed. We tell them that we're not here to tell them what to do -- we'll give them the facts."

The interest rate increase will also mean higher qualifying criteria for new clients, who must meet the five-year posted fixed rate when the new mortgage insurance rules kick in on April 19.

CIBC economist Benjamin Tal told the Globe and Mail the rise in rates along with other factors means the booming housing market will slow down significantly after spring.

"Given where interest rates are now, I still think you'll see an extremely strong spring. However, after that I think the housing market will stagnate," Mr. Tal said. "We are in the ninth inning of this booming house market. We are not expecting a crash, but we will stagnate."

 

3 Comments
  • Jason 2010-03-31 12:23:27 PM
    the oilpatch is already dead so lets try to kill the housing market as well
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  • John 2010-03-31 9:13:51 PM
    Well, sooner or later this exuberance has to be reigned in or the "bubble" will come to light and we will see a much deeper 'stagnation" in the housing market and the economy as a whole. I for one welcome this increase and expect more to follow.
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  • Suneel's comments 2010-04-03 12:50:48 AM
    The economy is not strong enough to sustain any slow down in realestate due to mortages being more expensive. All I see here is the bank's have joined hands to push clients towards higher rates by making variable rate qualifying so difficult. Income needed to qualify and prices of realestate are not in line.
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