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Rising mortgage rates

The Latest in Mortgage News – Fresh Round of Fixed-Rate Hikes Underway

Over the past couple of weeks, all of the big banks and countless other mortgage lenders have bumped up some of their fixed rates.

Meanwhile, markets are now fully pricing in a rate hike by the Bank of Canada at its March meeting, which will raise rates for the country’s variable-rate holders.

Here’s a look at some key rate changes to the banks’ special-offer rates since the start of the year:

TD

  • 5yr fixed (HR): 2.74% to 2.94% (+20 bps)
  • 5yr fixed: 2.84% to 3.04% (+20 bps)

RBC

  • 5yr fixed: 2.94% to 3.19% (+25 bps)
  • 3yr fixed: 2.69% to 2.94% (+25 bps)
  • 5yr variable: 1.65% to 1.70% (+5 bps)

Scotiabank

  • 5yr fixed: (HR): 2.74% to 2.94% (+20 bps)
  • 5yr fixed: 2.84% to 3.04% (+20 bps)
  • 3yr fixed: 2.64% to 2.89% (+25 bps)
  • All eHome rates increased 30 bps

BMO

  • 5yr fixed (HR): 2.82% to 2.92% (+10 bps)
  • 5yr fixed: 2.99% to 3.09% (+10 bps)
  • 3yr fixed: 2.69% to 2.84% (+15 bps)

CIBC

  • 5yr fixed (HR): 2.82% to 2.92% (+10 bps)
  • 5yr fixed: 2.99% to 3.09% (+10 bps)

NBC

  • 5yr fixed: 2.94% to 3.09% (+15 bps)

The moves follow a recent leg-up in bond yields (which typically lead fixed mortgage rates). However, since reaching a two-year highs reached last week, bond yields have since pulled back slightly.

To put these increases in perspective, based on an average new mortgage amount of $360,000 (as per Equifax data), and an average 5-year fixed rate of 2.94%, every 10 bps of rate increase results in about $19 more of monthly payment, or $1,697 over the course of a 5-year term.

As for variable-rate holders, markets are pricing in a near-certainty that the Bank of Canada will hike rates by 25 basis points at its next meeting on March 2, with a total of five quarter-point hikes priced in by the end of the year.

Federal foreign homeowner tax to yield less than Liberals planned

The new foreign homeowner tax planned by the federal government will net less revenue than initially forecast, according to a new report from the Parliamentary Budget Officer (PBO).

The Liberal government, which promised to introduce a 1% tax on foreign-owned vacant homes starting January 1, had projected tax revenues of $200 million in the 2022-2023 fiscal year, and a total of $700 million over five years.

According to BNN Bloomberg, Parliamentary Budget Officer Yves Giroux instead says the tax is more likely to bring in $130 million in the first year and $600 million over the full five years.

The discrepancy is apparently due to the “uneven breadth and quality of data available” for foreign home ownership in Canada.

CMHC mortgage insurance reduction to cost $1.4 billion

The Parliamentary Budget Officer also released full costing for another federal government promise to reduce CMHC mortgage insurance premiums.

During the election, the Liberal party promised a 25% decrease in mortgage-default insurance premiums charged by the Canada Mortgage and Housing Corporation (CMHC).

The PBO reported the total cost of that promise to be $1.4 billion over five years, while savings for the average homebuyer would work out to $5,341 in 2022-2023, rising to $5,863 in 2026-2027.

If implemented, the PBO said Canada’s private mortgage insurers would likely also reduce their premiums to closely match those of CMHC.

TNM Launches an Exclusive “No-Commitment” Mortgage

There’s a new mortgage product on the block. National discount broker True North Mortgage has launched an exclusive “No-Commitment Mortgage” for those in search of flexibility.

The product is an open mortgage, meaning borrowers can repay any or all of the outstanding balance at any time without penalty, at a low variable rate of 1.25% (prime minus 1.20).

“We are very excited to bring this product to market. Buying a house is stressful enough without the pressure of choosing the right mortgage product,” said Dan Eisner, founder and CEO of True North Mortgage. “With our No-Commitment Mortgage, clients can lock in their rate at any time, or have the option to pay off their mortgage partially or completely without penalties. They get the simplicity they need, with absolute freedom.”

The product has been made available through THINK Financial, a CMHC-approved lender licensed under True North Mortgage, and is available for purchases, refinances and switch transactions.

HomeEquity Bank surpasses $1 billion in reverse mortgage originations

Reverse mortgage provider HomeEquity Bank announced it surpassed $1 billion in mortgage originations in 2021.

The lender said this represents a 28% increase in volume from 2020, and brings the total of its reverse mortgage portfolio under management to $5.4 billion.

“We are excited to continue fulfilling our purpose of helping Canadian homeowners aged 55-plus enjoy a financially secure retirement in the home they love,” said Steven Ranson, HomeEquity Bank President and CEO. “We are incredibly proud of our achievements in 2021, all of which are testament to the amazing work of our talented team and the success of our business strategy.”

In September, HomeEquity Bank was acquired by the Ontario Teachers’ Pension Plan Board, subject to final regulatory approvals, which are expected in the first half of 2022.