First of the Big Banks Lowers its 5-Year Fixed Mortgage Rate
January 24, 2019
First of the Big Banks Lowers its 5-Year Fixed Mortgage Rate – On January 16, 2019, Royal Bank of Canada became the first of the big banks to publicly announce that it has lowered its posted interest rate for 5-year fixed mortgages.
The bank lowered its featured 5-year mortgage rate to 3.74% from 3.89%. The same five-year rate has been widely available from TD on their website since January 10. The rest of the big banks have not yet matched the newly posted rate, but industry experts believe it will only be a matter of time. All five banks are very influential, but RBC is the most, they are the largest bank in the country and they are the largest mortgage lender in the country. When they adjust their rates, it forces the other four to match.
Alternative lenders have already been lowering their rates for weeks, giving them a slight advantage in the market. There is anticipation that the major banks will settle their featured 5-year fixed rates at about 3.64% in the coming days.
The move comes as the yield on 5-year Government of Canada bonds has fallen sharply since November. Banks base their fixed mortgage rates on government bond yields. Five-year bond yields have fallen from a recent high of 2.46% on Nov. 8, 2018, to 1.93% as of Jan. 16, 2019, a decline of more than half a percentage point.
While fixed mortgage rates are getting cheaper, variable-rate mortgages have been getting more expensive, narrowing the gap between them. Variable mortgage rates fluctuate with movements in the Bank of Canada’s overnight lending rate, which is linked to banks’ prime lending rates.
A typical spread between a big bank’s 5-year fixed rate and variable rate mortgages has declined to 35 basis points from 104 basis points in November, making variable mortgages less attractive for many home buyers who are comparing the two.
While the 0.15% change may seem small, it could mean a lot to borrowers.
Based on a $500,000 mortgage, the lower rate would mean savings of about $44 per month or $2,640 over the five years.
March, April and May are the biggest mortgage months. That’s when all the lenders put their best foot forward as far as pricing and promotions go.
However, the rate is just one aspect of shopping for a mortgage, and we encourage clients to think about all aspects of their mortgage to make sure it suits their needs. We here at RE/MAX All-Stars Benczik Team Realty have partnered with some of the best mortgage agents in the business. Email us if you would like further information regarding mortgages and mortgage rates.
First of the Big Banks Lowers its 5-Year Fixed Mortgage Rate written by Benczik Team Realty
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