Royal Bank to boost residential mortgage rates again on Tuesday
By: The Canadian Press, Published on Fri Jun 28 2013
Royal Bank of Canada is once again boosting some of its home mortgage rates effective Tuesday.
The increases will range from one-tenth to three-tenths of a point, depending on the type of mortgage.
Royal Bank says its special discounted four-, five-, seven-, and ten-year rates are going up to 3.39, 3.69, 3.99 and 4.29 per cent respectively.
Royal increased some of its mortgage rates earlier this month following a plunge in bond prices in May.
Scotiabank and TD Bank have also recently increased their special discounted rates.
The recent increases have been small — just one-tenth to three-tenths of a percentage point — but economists and industry experts say these may be definitive signs of rates returning to historically normal levels.
“When something is on sale, whether it’s pastrami or mortgages, you buy it. But the fact is you must be prepared for prices to go back to normal,” Michael Gregory, senior economist at the Bank of Montreal’s BMO Capital Markets said earlier this month.
“Keep in mind that when you refinance a loan, whether it’s a car loan or a mortgage, you may be paying higher interest rates than you are now. Be prepared for normal.”
Federal Reserve Board chairman Ben Bernanke said on June 19 that the U.S. central bank will begin slowing the pace of its bond-buying stimulus program, now worth about $85 billion (U.S.) per month, later this year because the economy is gaining momentum.
As a result of his remarks, stock markets turned sharply lower, and yields on government bonds surged.
“The Fed knew that the moment they started to talk more openly and clearly about stopping their purchases, the market was going to puke. That’s a technical term,” Gregory said.
“There’s a general sense that the era of low yields is over,” he added.
“I believe we’re in an upward trend in yield. Will we get an increase of 30 basis points every two days? No,” he said. “These things move in fits and starts. Our sentiment is we will get a grinding gain, two steps forward and one step back.”
