RBC Boosts Fixed Mortgage Rates

Fixed rates are on the rise, following a dramatic 35 basis point rebound in the 5-year bond yield (which leads 5-year fixed rates).

RBC has announced rate increases ranging from 0.10 percentage points on a 1-year fixed to 0.15 on a 5-year fixed. The changes take effect tomorrow.

This doesn’t mean it’s time to panic. Today’s move means nothing with respect to where rates will be one year from now.

Moreover, unless the 5-year yield crawls higher than its current 2.35%, we may see a few smaller lenders hold out with 3.65% on a 5-year fixed. That’s still a great rate at a very reasonable 130 basis point spread above5-year yields (125bps is “normal” in a competitive market).

Today’s rate changes will make it slightly harder toqualify for high-ratio mortgages with a variable or 1- to 4-year fixed rate. That’s because the benchmark “qualification rate” will rise from 5.39% to 5.54% on Monday July 11 (assuming other major banks follow RBC’s lead).

Rob McLister, CMT