Canada’s two biggest banks have raised the interest rate on their benchmark five-year mortgage, and more are expected to follow.
The Royal Bank of Canada raised its posted rate for a five-year, fixed-rate mortgage by 15 points to 5.14 per cent, the bank confirmed to CBC News in an email.
Shortly after, Toronto-Dominion Bank did the same, matching Royal Bank’s new rate.
Canada’s other three major banks — Scotiabank, Bank of Montreal, and CIBC — currently have five-year posted rates of 4.99 per cent, but they are also expected to hike soon, based on what’s happening in the bond market.
Banks finance their mortgages via a variety of sources, but the main one is by selling bonds, which they use to raise funds and then lend that money out to home buyers and other borrowers.
Rates in the bond market have been inching steadily higher, which raises the banks’ cost of doing business.
The annual yield on a five-year bond from the Canadian government briefly topped two per cent this week, the first time it’s been that high since 2013. Two-year government bond yields also spiked to 1.8 per cent, their highest level since 2011.
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