In recent weeks, mortgage rates have increased at many of the big banks. Just this week, CIBC was the latest big bank to increase mortgage rates saying that it is â€œresponding to the market.â€ The move follows recent increases by RBC, TD and Scotiabank.
Robert McLister of Canadian Mortgage Trends believes that there are a host of reasons why both fixed and variable mortgage rates have been ticking higher, although these all seem to come back to higher capital costs for the banks. A few factors in particular are as follows:
- Investor perceptions about increasing levels of risk in the housing market and the financial sector is being priced into their funding.
- Recent mortgage rule changes from Ottawa aimed at reducing risk in the countryâ€™s housing market include higher fees charged to lenders looking to securitize their government-backed mortgages and a proposal that could force lenders to hold more capital against some insured mortgage loans.
- The possibility that the Bank of Canada will cut its benchmark lending rate again, which would put pressure on banksâ€™ lending margins, and
- Short-term interest rates that have been climbing higher, which is a major factor in the pricing of variable-rate mortgages.
All told, â€œItâ€™s going to be more expensive for banks to hold mortgages,â€ said Mr. McLister.