Are interest rates heading up?
Canadian banks are raising mortgage rates, about 1% over the past month, even though the Bank of Canada rate has remained constant.
I had a look at the term deposit rates they are offering, and they are still really low, lots of terms still below 1%. So, it looks like the banks are increasing the spread that they are taking on loans or building risk back into mortgage rates.
Actually, when I look at the mortgage rates at the Royal Bank they have taken on a historical look.
Canadian mortgages are different then US mortgages in that you always have to renew the mortgage terms after a set number of year, and you choose the term you want. Generally, you pay more for the security of having a fixed rate longer, and the banks charge more which is essentially pricing in risk and enabling them to offer better rates for longer term deposits.
Well, though the market insanity and housing bubble era that spread was gone for a while. I can remember looking at rates and the 3 year rate was the same as the 5 year rate and in some cases the shorter term rates were higher then the longer term rates.
Anyway, a 1% increase with no increase in the Bank of Canada rate is significant.