TD becomes first major bank to hike fixed five-year mortgage rates amid surge in bond yields
Bay Street expected higher interest rates – but not this high, this fast. And we’re now starting to see the impact on those shopping for mortgages.
Canada’s five-year government bond yield, which leads fixed mortgage rates, surged past 1 per cent on Friday morning, its highest since before the Bank of Canada cut rates last March. That’s a 50-basis-point move in nine trading days, the likes of which we haven’t seen since 2010. (There are 100 basis points in a percentage point.) In late afternoon trading on Friday, the yield slipped back down to 0.89 per cent.
TD Canada Trust TD-T-1.19% decrease was the first big bank to react Friday with a boost, by a quarter of a percentage point, to its “special” five-year fixed rates. At 2.24 per cent, its uninsured five-year fixed is now the highest it’s been since September. Other major banks should be right on TD’s coattails.
We’ve written about a rate rebound since November but most borrowers are feeling blindsided. They’re now flooding lenders with mortgage applications to lasso fixed rates that could be gone next week. And you can’t blame them for the urgency. A quarter-point rate boost translates into real dough: $3,500 of extra interest on your average new $300,000 mortgage over five years.
Every lender I speak with is reporting application volumes more than 50 per cent above normal for the last week in February.
“Mortgage applications continue to remain higher than historical volumes, as they have throughout the winter, and we are preparing for what we believe will be a robust spring market,” said Jonathan Bundle, HSBC’s head of products – mortgages wealth and personal banking. “With the volatility in bond yields, we will need to respond to any significant rise in the cost of funds, while remaining committed to offering very competitive rates to our customers.”
Rate lock pointers
For those needing financing this spring, here’s some advice: