CIBC announced Tuesday (May 1) that it would be following TD Bank and RBC’s recent moves in raising its fixed mortgage rates, with a 15 basis-point increase taking its five-year fixed rate to 5.14 per cent.
The bank said seven- and 10-year fixed rates would also rise 15 points, with one- and two-year fixed rates going up by 10 points.
The move follows TD Bank and RBC recently announcing five-year fixed-rate increases, with TD posting a huge hike last week at 45 basis points. That takes TD’s five-year fixed posted rate to 5.59 per cent.
RBC increased its posted rate for a five-year fixed mortgage April 30 by 20 points to 5.34 per cent.
Fixed-rate mortgages are linked to government bond yields, which are currently at a seven-year high, prompting the Big Banks to follow suit.
The banks’ posted rates are not the rate that mortgage holders typically pay (the contract rate), as banks offer customers a discount on both fixed and variable rates. However, the discount is often fixed, so the contract rate tends to rise and fall in a similar pattern to the posted rate.
Further, under the new mortgage stress test, mortgage applicants are now required to qualify at either the Bank of Canada five-year posted rate (currently 5.14 per cent) or their contract rate plus two per cent, whichever is the greater. This means new mortgage applicants going to lenders who now offer contract rates at 3.14 per cent and above may only be able to qualify for smaller mortgages, and therefore lose more purchasing power.
Alisa Aragon, a mortgage professional and advisor at Bridgestone Financing Pros, said, “With fixed rates rising, if you are looking at purchasing a new property, refinancing or consolidating debts, get a pre-approval as soon as you can, as you can hold your rate for up to 120 days.”
She added, “Even if you have a variable rate, it is a good idea to review your options to see if it makes sense to lock in with a fixed rate or review your discount to see if a higher one can be obtained with a different lender.”