The major banks have pared back on variable-rate discounting and smaller lenders are wasting little time following their lead.
In the last few days, multiple lenders have raised their variable rates to anywhere from prime minus 0.70% to prime minus 0.50%.
That’s roughly 20 basis points worse than the deeply discounted variable rates available last week.
From the look of things, the new standard for a thrifty variable rate is shaping up to be prime minus 0.70% +/-five basis points (i.e., 2.25% to 2.35% as of today).
That said, a few nonconformist lenders remain with cash to loan and a desire to pick up market share. For that reason, you may see some lenders and brokers continue to offer better than prime minus 0.70% on a case-by-case basis.
In the fixed market, there’s a chance of further behind-the-scenes rate cuts next week (barring a large jump in bond yields). We’ll wait and see how that shakes out to determine how variable rates stack up.
Suffice it to say, the increase in variable rates has made medium terms more attractive from a hypothetical interest cost perspective. (A “Medium term” means a three- or four-year fixed.) Hopefully more lenders (besides Industrial Alliance and RBC) come out with fair pricing in this part of the rate curve.
Rob McLister, CMT
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