With the Royal Bank
of Canada’s implementation of the latest round of mortgage rate increases last week, banks and other major lenders have begun lowering the discounts for floating rate mortgages.
Even with the new 2.6 per cent rate average on variable-rate products, however, this is still considered by industry observers to be among its historically lowest levels. To compare, fixed-rate mortgages with five-year terms currently enjoy a rate of 3.04 per cent.
Experts noted that such stretches of low rates allow variable-rate buyers to save more, although the option essentially removes the safety blanket of a stable rate throughout the term. The RBC raise gave incentive to some banks to get in lockstep, though.
“The spreads were narrowing and that causes us to raise rates,” Bank of Nova Scotia
’s real estate lending head David Stafford told the Financial Post
, elaborating on the bank’s move to implement a similar average on variable-rate products.
Industry players said that these numbers are the reason why lenders continue to offer cut-off primes of 50 basis points for variable rate mortgages, as banks profit less from floating rates than from borrowers locking in their loans.
“We kind of chuckled when they raised rates because we have some lenders dropping rates. The big banks are trying to move people out of the variable (and get them to lock in),” MonsterMortgage.ca owner and broker Vince Gaetano told the Financial Post