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RBC lowers fixed mortgage rates 2:15
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RBC has cut two-, three, four- and five-year fixed mortgage rates by 10 basis points after a slide in Canadian bond yields.
Other Canadian banks will be watching the change and could move Monday to follow.
RBC posted the new rates over the weekend on its website. RBC’s discounted five-year fixed rate is now 3.69 per cent, though it may discount that rate for preferred customers.
Five-year fixed mortgage rates rose industry-wide for much of 2013 with an uptick in August helping to cool the overheated housing market.
The five-year rate is an important measure because it is the rate used to qualify borrowers for CMHC financing and for variable and other fixed-rate terms.
The new rate reflects the lowering of Canadian bond yields by 26 basis points in January, which mirrors the slide in yields on U.S. bonds. Bank borrowing costs rest in part on bond yields.
The Bank of Canada has not changed its key overnight lending rates to the banks – it will announce its latest decision on interest rates on Wednesday.
Bond yields rose when the U.S. Federal Reserve decided in December to taper its bond-buying program to $75-billion US a month, but the market has since absorbed the change. However, further Fed tapering or changes in the U.S. economic outlook could lead to fluctuation in the bond markets later this year.
The small change in rates won’t have much impact on home buyers at a time when rates are so low, says one mortgage broker.
“From a mortgage broker’s perspective and probably from a lot of homeowners’ perspective, the real question is not necessarily interest rates,” said Jason Scott of The Mortgage Group in Edmonton.
“It’s got more to do with what the finance minister and the department of finance will do vis-a-vis making it harder to qualify for a mortgage if they don’t like the fact that rates are low and they’re concerned about a possible housing bubble.”
Finance Minister Jim Flaherty has expressed concern at Canada’srapidly rising housing prices and has taken a series of measures over the last two years to cool them, including demanding higher downpayments and limiting most mortgage terms to 25 years.
cent in the past year, and more consumers are running into the red, according to Royal Bank’s debt poll.
Just 24 per cent of Canadians say they are debt-free, compared to 26 per cent in 2012. And those who are in debt have increased their non-mortgage burdens to $15,920 from $13,141 in the same time frame, RBC’s survey found. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior.
Canadians are taking advantage of the era of super low interest rates to finance more borrowing, a move the government has vocally discouraged.
Debt loads have skyrocketed in the years since the 2008-2009 recession, after the government dropped borrowing rates to near zero in order to stimulate consumer activity, the housing market and the economy.
The RBC poll found that the number of Canadians who are anxious about their debt levels has risen four percentage points in the past year, to 38 per cent. Still, the same number said they are comfortable with the amount they owe.
The household debt-to-disposable income ratio is at an all-time high, around 163 per cent. That means for every dollar Canadians earn, they owe $1.63.
However, in its latest monetary policy report, Canada’s central bank slashed its economic outlook for Canada for the next three years and indicated that a troubled global economy may compel it to maintain interest rates at the current near record low rate of one per cent, where it has been since 2010.
The announcement left many observers wondering whether the prolonged low interest rate environment will increase the likelihood of a housing correction or hard landing for borrowers when rates finally rise.
The RBC poll was conducted by Ipsos Reid from Aug. 22 to 27 through an online sample of 2,108 Canadians with an estimated margin of error of plus or minus two per cent, 19 times out of 20.
- Three-quarters of Canadians polled have personal debt: RBC survey (canadianbusiness.com)
- Average personal debt at nearly $16,000: poll (globalnews.ca)
- Three-quarters of Canadians are in the red with average personal debt of $16K: poll (o.canada.com)
- Canadians more frugal due to rising food prices: RBC Canadian Consumer Outlook (sacbee.com)
- Food costs lead Canadians to shop around, cut back: study (theglobeandmail.com)
- Rising food prices cause Canadians to cut back (beaconnews.ca)
- How one Victoria family is coping with soaring food prices (theglobeandmail.com)