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RBC Cancels 4-year Promo Early

RBC-BankRBC’s 2.99% four-year fixed promotion was intended to last until February 29. RBC is instead cancelling it early, effective Wednesday February 8.

The nation’s biggest bank is raising its:

  • 4-year fixed “special offer” by 40 bps to 3.39%
  • 5-year fixed “special offer” by 10 bps to 4.04%
  • 5-year fixed posted rate by 10 bps to 5.24%

Some quick points on these changes:

  • Other major banks are expected to match some or all of RBC’s rate increases, but that’s far from guaranteed.
  • Some lenders and brokers may continue offering 4-year fixed terms at 2.99% (or less), at least for the time being
  • For just 10-20 bps more (i.e., 3.09-3.19%) you can find several brokers offering 5-year fixed mortgages. That’s a reasonable premium for one extra year of rate protection.
  • RBC’s 4.04% five-year “special offer” is almost a full point above 5-year fixed rates on the street. No one other than the most novice mortgage shoppers take this rate seriously.
  • RBC spokesman Matt Gierasimczuk attributed today’s rate increases to this:

“Our long-term funding costs have gone up considerably due to global economic concerns and, while we have held off in passing on these rate changes to our clients, it is now necessary for us to increase this mortgage rate.” (Source: Bloomberg)

  • interest-ratesWe can find nothing to suggest RBC’s 4-year fixed funding cost rose 40 basis points since mid-January. It has among the lowest cost of capital in Canada and other lenders have recently launched new 2.99% four-year specials of their own (one of them today).
  • The Globe and Mail quotes sources who say that regulators were unhappy with the “price war” that followed BMO’s 2.99% five-year special. That may be somewhat linked to this announcement, hints the article. The government is clearly worried that low rates may incite borrowing and inflate the debt balloon further.

Rob McLister, CMT