The first changes will happen with hidden special promotions, according to Dan Eisner, the CEO of True North Mortgage. He’s personally heard from a few smaller lenders who at times offer such discounts and they’ve warned him that promotions may quickly disappear. Eisner said these lenders often offer a 10-basis-point discount on a quick close, of 30 days for example.
Ron Butler, the founder of Butler Mortgage, said he’s already seen rates go up on hidden promos for high-end mortgages in the $1 million range. The secret promotional rate for fixed five-year mortgages of this calibre — those that are only given to the best clients, with the best credit ratings and those willing to close in 30 days — was 1.59 per cent two weeks ago. Since then, most of the big banks have raised the rate on those same mortgages to 1.64 per cent, he said, adding that rates may have bottomed “two weeks ago.”
A wider scale 20-basis-point change would add minimal costs for Canadians. Butler Mortgage currently offers a fixed five-year rate for 1.35 per cent. On a $500,000 mortgage, that would require payments of $1,966 per month, Butler said. With a 20-basis-point hike, he calculated that the same mortgage would cost $2,012 per month and result in an estimated $2,000 change to mortgage balances.
The story changes, though, if the escalation in bond yields is signalling a turn in momentum that could lead to multiple hikes over the next few months.
Except for a brief blip in June, when they hit 0.52 per cent for a day before crashing back down to 0.37 per cent, yields have hovered between 0.35 per cent to 0.40 per cent since April. In January, before COVID-19 hammered the bond market, yields sat at 1.3 per cent. The proceeding plunge led to a similar fall for five-year fixed mortgage rates. CanWise was offering a 2.49 per cent rate on a five-year fixed mortgage that is now 100 basis points lower.