Lenders have begun to raise their Variable rate mortgages again…. The second increase in less than a month. A look at the Bank websites and you will Variable rate pricing is now at Bank Prime less 0%…. that’s 3.00%… And although ‘3.00%’ sounds like a good rate, a Variable rate at Bank Prime less 0% is not good.
The Banks have gone from an advertised rate of Prime less 0.65% to Prime less 0% in about one month’s time. Of course, the best wholesale rates through mortgage brokers now sit at Prime less 0.50% and will probably go to Prime less 0.40% after the dust settles.
So what’s causing the Banks to increase their Variable rate mortgages? They tell us there are “profitability concerns”. In simple talk, that means they simply want to increase their profit margins now that rates are expected to stay low for some time to come. They also want to force us to take the much mortgage profitable 5 year fixed rate mortgage, now sitting at 3.99% (RBC website special rate).. Keep in mind, there are better rates to be had in the wholesale market…. 3.49% seems to be the best 5 year fixed rate today.
But even 3.49% is too high. The spread between the 5 year govt of Cda bond (1.45%) and 3.49% is still over 2.00%. Historically, this spread has been between 1.10% and 1.40%.. It’s simply math…. the Banksters are saying ‘ka-ching, ka-ching”.