Rate hikes spur rate holds

by |

Brokers are starting to see an uptick in the number of clients looking for rate holds after several lenders pushed select VRMs further into plus-prime territory, a broker channel player among them.

“I think we’ll see an increase in the number of clients looking for 120-day rate holds, which won’t get them all the way to spring, but close,” Harold Hagen, an agent with Verico MyMortgage.ca Inc.in Calgary, told MortgageBrokerNews.ca. “People are reactionary, and they’ll want to see what they can do to stabilize future uncertainty because of the rate changes.”

Effective Tuesday, rates on some RBC variable mortgages – as well as its five-year fixed – rose by 10 basis points.Its five-year open variable shot up 30 bps to prime + 1.00 per cent.

Its five-year closed rate now sits at 5.29 per cent. CIBC also edged its five-year rates up a tenth of a point to that same 5.29 per cent.

Leading a variable rate climb for the broker channel, FirstLine Mortgages shot through the prime barrier Friday, setting one of its own VRMs at prime +0.05 per cent.

More lenders since followed the lead of the big banks, at least on fixed rates, given movement in the bond market late last week. Those gains reflect the surprisingly positive job numbers in the U.S., which added 103,000 jobs last month – more than twice what most economists had predicted.

That rosier picture actually increased borrowing costs for lenders, both in and outside the broker channel, with economic growth forecasts putting upward pressure on rates in the bond market.

This week’s rate hikes may encourage a number of preapproved borrowers into the market, although a dearth of properties for sale in some markets may block their willingness to move to closing.

It’s why Hagen and others are anticipating a number of clients will look to lock into today’s rates, in hopes of being able to access them early next year as sellers enter the early spring market.

  • Angela Wong-Liao, Invis Inc on 2011-10-14 11:46:22 AM

    In view of the all times low fixed term mortgage rates and the reduction of the discount on variable rate mortgage, I have encouraged my clients to go with fixed term now as the interest rates will increase in future, some economists predicted in mid 2012 and some predicted in 2013, however, if my clients are planning to stay at their homes for at least 5 years, the fixed term mortgage products should be a better alternative for them.

  • Lior on 2011-10-15 5:43:08 AM

    The sovereign debt crisis in Europe has definitely pushed up the cost of funds for financial institutions. I wouldn't put too much faith in the US job numbers as they been quite volatile this year and this trend, based on current forecasts, is definitely going to last well into 2012 and probably getting worst before there's any *sustained* improvement.

    So with that said, mortgage rates will remain low as bond yields remain depressed. But again, the debt crisis in Europe and the anemic response of regulators over there to the contagion can morph into a full-blown credit crisis which could potentially push short-term credit rates way up.

    Just like disciplined investing, mortgages require you to think outside the box and concentrate on the long-term horizon. There has been a lot of noise (sic) as of late about fixed rates being more attractive than variable rates. While this is certainly true for short-term fixed rates, the long-term savings trend is stacked in favour of variable rates in the majority of the times. So, it may be worthwhile to ride out the volatility. Just because some banks are already ripping their clients off with prime plus variable mortgages doesn't mean there are no alternatives in the marketplace that are priced lower.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions