Canadian banks delivered the first clear sign that the era of rock-bottom interest rates is over by suddenly hiking mortgage rates, a move that will cost Canadians more to finance home purchases and likely hasten an expected slowdown of the red-hot housing sector.
Surging home sales and prices were already expected to cool in the second half of this year as more listings hit the market and the Harmonized Sales Tax adds to purchase costs in Ontario and British Columbia.
Hikes on fixed-rate mortgages announced by three banks Monday (March 29, 2010) are expected to contribute to the slowdown as home buyers face higher costs amid a growing expectation that interest rates are likely entering a phase of higher levels.
The hikes are also expected to push some homeowners who have enjoyed ultra-low variable mortgage rates to lock in at set levels. Readings on inflation and the resurgent economy point to rate hikes within a few months by the Bank of Canada, whose trendsetting rate influences variable mortgage rates.
Royal Bank of Canada boosted the rate on five-year fixed-rate mortgages by 60 basis points to 5.85 per cent Monday, a move matched by Toronto-Dominion Bank. Laurentian Bank announced similar changes. Other major banks are likely to follow with rate hikes of their own.
No comments:
Post a Comment