Bank of Montreal has boosted rates on some popular mortgages and Canadian Imperial Bank of Commerce is following suit as anticipation builds that the country's central bank will likely raise its benchmark interest rate next week.
On Friday, BMO hiked rates on its five-year fixed and five-year "Smart" fixed-rate mortgages by 20 basis points each, to 2.89 per cent and 2.79 per cent respectively, when amortized over 25 years or less. (A basis point is 1/100th of a percentage point.) The bank, which is Canada's fourth-largest bank by assets, also pushed its three-year mortgage rate 10 basis points higher, to 2.64 per cent.
For mortgages with amortization periods longer than 25 years, special rates on a three-year mortgage climbed 10 basis points to 2.74 per cent, and 20 basis points to 2.99 per cent on a five-year fixed term.
At CIBC, the country's fifth-largest lender, variable- and fixed-rate mortgages will rise in the range of five to 15 basis points, effective Saturday. "This change in rates reflects many factors, including funding costs and market conditions," said CIBC spokesperson Caroline Van Hasselt, in an e-mail.
These latest moves come just days after Canada's two biggest banks, Royal Bank of Canada and Toronto-Dominion Bank, both boosted their own posted rates. On Wednesday, RBC increased two-year, three-year and five-year fixed-mortgage rates by 20 basis points each. The new rates took effect on Thursday, and RBC's five-year fixed rate now stands at 2.84 per cent.
Also on Wednesday, TD raised its posted "special" rate on a three-year mortgage by 28 basis points to 2.64 per cent, while the four-year special jumped 32 basis points to 2.79 per cent.
Taken together, this latest array of rate increases will alter the math on home ownership for borrowers who are already navigating housing markets under considerable stress. Prices in major cities such as Vancouver and Toronto have been shooting higher, though new provincial measures taxing foreign buyers and trying to curb speculation appear to have had some cooling effect.
At the same time, Canada's banking regulator is considering tightening mortgage-underwriting standards. And alternative lenders that cater to new immigrants and self-employed people who might struggle to qualify for a mortgage have come under scrutiny after Home Capital Group Inc. suffered a run on its deposits.
Bank of Nova Scotia has held its posted five-year rate steady since March, at 4.64 per cent.
Spiking bond yields appear to be one driving factor behind the banks' decisions to move rates higher – the yield on the Government of Canada five-year bond has risen above 1.4 per cent in July, up from about 0.9 per cent just a month ago.
Higher bond yields, in turn, are partly a response to widespread expectations that the Bank of Canada will raise its key benchmark rate by a quarter of a percentage point next week. It would be the first such hike in roughly seven years.
"The mere mention of a rate hike had an effect on bond yields, already resulting an increase in the popular five-year fixed-rate mortgages over the last month," said James Laird, co-founder of RateHub.ca and president of CanWise Financial mortgage brokerage, in a statement earlier this week.
The Bank of Canada's rate decision will be released on July 12.