Canadian mortgage rates are beginning to inch higher for the first time since before the COVID-19 crisis, reflecting the spike in long-term bond yields, but with home loans still languishing around historically low levels the modest hike is unlikely to slow the red-hot housing market.
The lowest rate for a Canadian five-year fixed rate mortgage, the most common mortgage in Canada, climbed by 25 basis points last week to 1.64 per cent, according to Ratehub.ca. It was the first increase since January 2020. The move could encourage buyers to lock in historically low borrowing costs before they rise further.
Mortgage rates had been trending lower in Canada since the Bank of Canada slashed its benchmark interest rate last March to a record low of 0.25 per cent to support the economy during the pandemic. So the move-up in mortgage rates is a sea change for home buyers, providing a sense that a bottom could be in place.
There was “a stampede to lock in rates last week and get pre-approvals,” said James Laird, co-founder at Ratehub.ca, which compares rates on mortgages, insurance and credit cards. “There could be more increases coming.”
TD Bank and National Bank of Canada told Reuters they have raised rates on at least some mortgage products, but Royal Bank of Canada, the country’s biggest lender, said it has not raised mortgage rates recently.