TD Bank increased it’s posted rates and RBC will be doing so today.
This increase, from 5.14% to 5.59% at TD, is the “biggest move in years.”
The first reason for a lender to increase their rates would be when the bond yields increase. We have seen a slight increase but not that much, and definitely not enough to increase the discounted rates too. Generally, when the bond market changes, the discounted rates will change.
Discounted rates are the rates that clients actually see on their mortgage commitments.
But actual discounted interest rates have not changed… so what exactly is happening?
Banks benefit from higher Posted Rates, and here is why:
#1. Posted rates are being used to calculate the bank’s mortgage penalty.
Banks use the posted rate for their penalty calculations. The higher the posted rate, the higher someone’s potential penalty is when they break their mortgage prior to the end of the term. I’m referring to the Interest Rate Differential ( IRD) for the fixed rate mortgages. Needless to say, this is definitely not in the clients’ best interests.
If you are in a variable rate mortgage or with a mainline lender, this does not concern you since the payout calculations are very different (and lower).
What is a Mortgage Renewal? A mortgage renewal is when the current terms of your mortgage come to an end and you sign on for a new mortgage term.
The time is now to spring into action, up to three months ahead of your mortgage renewal deadline...
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