Reblogged from The Globe and Mail, Tim Shufelt
The discount mortgages that stoked the Canadian housing boom are disappearing, increasing the likelihood of a correction in home values.
On Thursday, Royal Bank of Canada will hike its five-year fixed-rate mortgage to 3.89 per cent, one day after the Bank of Montreal raised its rate to 3.79 per cent. The other major lenders are all moving in the same direction.
The increases mean the cost of a new fixed-rate mortgage has climbed by more than a third in five months, signalling what could be the beginning of the end of ultra-cheap credit in Canada – and the start of fiscal pain for consumers who have overburdened themselves with debt.
“I think this is the real thing,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “This is the end of extremely low interest rates. They’re simply unsustainable.”
- TD, RBC follow other banks in hiking mortgage rates (cbc.ca)
- Mortgage rate hikes put the squeeze on Metro Vancouver homebuyers (vancouversun.com)
- Why are Canadian mortgages rising? And how far could they go? (macleans.ca)
- Demise of the discount mortgage? (blogs.montrealgazette.com)