Royal Bank hiked its mortgage rates on Tuesday, especially for borrowers who want to take 25 years or longer to pay down their loans.
TORONTO – The Royal Bank of Canada has raised some of its mortgage rates, and the changes are going to make paying down the mortgage even more expensive for people who choose to take longer than 25 years to do so, reported CBC News.
Starting Thursday, for a three-year fixed rate mortgage at the bank, borrowers with amortizations of 25 years or less will pay 2.69 per cent —an increase of 25 basis points from what it used to be.
The four-year rate has jumped to 2.79 per cent, up 30 points, and the five-year is now 2.94 per cent — also up 30 points.
Rates for homeowners who want to take more than 25 years to pay down their mortgage have jumped by even more: The three-year rate is now 2.79, the four-year is 2.89 and the five-year is 3.04 per cent — increases of 35, 40 and 40 points, respectively.
Earlier this month, TD hiked its prime rate to 2.85 per cent in anticipation of new rule changes set to be implemented at the end of this month that will increase the cost of insuring mortgages, especially for alternative lenders.
Banks use a variety of funding sources to find the money to lend to people wanting to buy homes, but one of the main ones is on the bond market. Simply put, banks make money on the spread between how much they have to pay investors to borrow money, and what they then turn around and charge home buyers for mortgages.
