Royal Bank of Canada’s decision to raise its mortgage rates Monday was quickly followed by Toronto-Dominion Bank , in a sign that the mortgage price war could be drawing to a close.
RBC, the country’s largest mortgage lender, increased rates Monday morning as banks seek to reinflate their profit margins.
“Some of our posted rates have risen to reflect cost increases over time,” a spokesman for RBC said in a statement.
Both RBC and TD raised their special offers on four-year fixed-rate mortgages by half a percentage point, to 3.49 per cent, effective March 29.
Mortgage lenders have been locked in a stiff competition that has seen rates fall to record lows, after Bank of Montreal ushered in 2.99 per cent rates in a bid to gain market share. Some executives at rival banks have said that they felt compelled to follow suit even though the mortgages they were selling at the ultra-low rates were barely profitable.
Both RBC and TD also increased their regular five-year fixed-rate price by one-fifth of a percentage point, to 5.44 per cent. And their five-year variable rates are rising by one-tenth of a percentage point to prime plus 0.2 per cent.
Other lenders will now have to decide whether to follow suit or maintain lower rates in an effort to grab more customers.