The deep discounts seen in the Canadian mortgage market in recent weeks are beginning to evaporate, as Canadian banks pull back on the historic low rates they rolled out in January.
Royal Bank of Canada announced Monday that it is raising rates on a four-year fixed-rate mortgage with a 30-year amortization, to 3.39 per cent. That is an increase of 40 basis points from the 2.99 per cent RBC had been offering. (A basis point is 1/100th of a percentage point.)
RBC also increased the rate slightly on a five-year fixed rate mortgage to 4.04 per cent, an increase of 10 basis points.
The move comes after Bank of Montreal recently ended a two-week push in late January that saw it offer five-year fixed-rate mortgages with a 25-year amortization at 2.99 per cent.
The move was designed to drum up mortgage sales in an otherwise slow month, and forced other banks to match those rates on a variety of similar offerings. Since banks track each others’ moves closely, it is expected others will likely follow with a similar increase in the days ahead, now that RBC and BMO are pulling back.
When RBC announced it was dropping its rates Jan. 13, the bank intended to keep them in the market until Feb. 29.
The price-cutting by the banks caught Ottawa’s attention, as the Bank of Canada and the Finance Department both remain concerned about Canadians taking on too much household debt. Sources told the Globe and Mail last week that officials in Ottawa were unhappy with the price war that developed on mortgage rates in January, at a time when the government is watching the housing market closely, concerned about consumers taking advantage of low rates to pile on debt, which could result in problems in the future if rates begin to rise.