RBC Hikes Mortgage Rates

RBC Hikes Mortgage Rates

Royal Bank of Canada, Canada’s biggest lender, on Thursday said it had lifted the posted rates on some of its fixed-rate mortgages, following the lead of its biggest rival Toronto-Dominion Bank on Wednesday.

The move will make it even harder for borrowers to obtain home loans, coming after Canada’s banking watchdog introduced new rules at the start of the year compelling banks to test if borrowers can afford to repay loans at a level 200 basis points the contracted rate.

RBC said that rates on its one year to four year fixed rate mortgages would rise by 15 basis and rates on its five year to ten year fixed rate mortgages would rise by 20 basis points from April 30.

The bank’s current posted fixed five year mortgage rates is 5.14 percent and it will rise to 5.34 percent. However, RBC’s five year variable mortgage rate will fall to 3.3 percent from 3.45 percent.

The shift from ultracheap borrowing costs comes at a time when regulators are trying to cool Canada’s housing market, particularly in Vancouver and Toronto, with tougher rules for mortgage lending.

As of January, prospective home buyers with more than a 20-per-cent down payment are now required to pass a stress test to ensure they can make mortgage payments even if mortgage rates rise by two percentage points.

The changes have raised questions about how many prospective home buyers will now be shut out of the market.

The Toronto Real Estate Board reported earlier this month that Toronto home prices fell 14 per cent in March, year-over-year. However, prices rose 2.2 per cent from the previous month, suggesting prices have begun to stabilize.

In Vancouver, the number of residential sales fell nearly 30 per cent in March, year-over-year. However, condominium prices rose 22.8 per cent while prices for detached homes fell 6.2 per cent.