Bank of Montreal has raised rates on its posted mortgages, joining a number of other Canadian big banks as they respond to rising bond yields.
Effective Thursday, BMO raised the rate on its five-year fixed mortgage to 5.19 per cent from 5.14 per cent.
But rates on its entire slate of fixed-rate mortgages also rose. For example, the rate for a one-year mortgage rose to 3.44 per cent from 3.29 per cent – an increase of 15 basis points. The rate for a 10-year mortgage rose to 6.5 per cent from 6.3 per cent.
The changes were initially reported by RateSpy. BMO confirmed the moves.
While home buyers can usually negotiate rates that are lower than the banks’ posted rates, the changes nonetheless highlight the fact that borrowing costs are rising as markets respond to a confluence of changes: Global economic growth is picking up steam, inflationary pressures are building and central banks are raising interest rates.
Although both the Bank of Canada and the U.S. Federal Reserve held their respective rates unchanged at their latest monetary policy meetings, financial markets expect rate hikes later this year.
The changes from BMO follow similar changes at four of Canada’s biggest banks, after Toronto-Dominion Bank led the pack with rate increases last week, followed closely by Royal Bank of Canada, National Bank of Canada and Canadian Imperial Bank of Commerce.
Rising posted rates come at a time when Canada’s housing market is adapting to regulatory changes designed to slow home-price appreciation in particularly hot markets – notably Toronto and Vancouver. Among these changes are stress tests, designed to ensure that home buyers can handle payments if mortgage rates rise by 2 percentage points, potentially making it more difficult for cash-strapped or indebted Canadians to buy homes.
The changes may be showing up in home-buying activity. Sales data from the Toronto Real Estate Board (TREB) showed home prices in the Greater Toronto Area in April were relatively unchanged from March, but are down 12 per cent from last year. In Vancouver, residential sales last month fell to their lowest level in 17 years.
David Berman