Bond Market down but RBC increases rates again?

Yes, it’s true….yesterday, RBC lead the way with another interest rate hike on their 5 year  fixed mortgage… followed by TD and Laurentian Bank….  It was a 0.15% increase for a new 5 year Bank Posted rate of 6.25%.   This marks the 3rd increase in a month.

This latest rate increase is leaving many puzzled as the Bond Market has remained somewhat flat… the 5 yr Bond yield is currently 3.07%.   A fully discounted 5 year fixed rate at TD can be had for around 4.79%.. that’s giving a huge spread of 1.72%… well above the 1.20% to 1.30% that Banks normally seek….

Okay, so why would the Banks increase the fixed rates?   Sometimes Banks price themselves out of the market when they achieve their market share… and sometimes it’s just profit taking…. But don’t settle for these rates if you are looking for a Fixed rate.. the Broker Market is still offering much lower rates and the Variable rate mortgage can be had for around 1.70%….