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Royal Bank raises 5 year mortgage rates.

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Residential real estate rates just went up today at the Royal Bank:

Canada’s largest bank said Monday it is increasing six-month rates by a tenth of a point and closed loans ranging from one year to five years by a fifth of a point.

The changes are effective Tuesday and mean a three-year loan rises to 6.6 per cent, while a five-year mortgage increases to 6.65 per cent and a 10-year term to 7.4 per cent.

The changes reflect rising costs of borrowing in the bond market, where banks finance their house lending.

This is interesting in light of several statements I’ve seen predicting a lowering of rates this year. If rates inch up further how much of an impact will we see in the Vancouver housing market with affordability rates nearing %75 of average pretax income?

Rate changes affect first time buyers as well as current owners. VHB has an interesting post about the renewal gap and what that can mean for home-owners and potential move-up buyers.

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loki

Investbee: do you feel confident that rates will be as low or lower than they are now in 1 or 2 years? Is there a reason you won't go for a longer fixed term?

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bc_cele

I can just see the ads now – buy now before rates go up! That begs the questions "but weren't we suppose to be buying before because rates were the lowest they were in decades?"

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VanPhoenix

The slowing RE market and increase in interest rates. Sounds like the investors and speculators might take a beating. Well…that's my hope, anyway!

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patiently waiting

Interest rates can go down but you can never decrease how much you paid for your home. Bring it on!!!

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solipsist

How much will interest rates play a part in your decision to buy?Personally, I welcome higher interest rates for mortgages. If I had bought in the last few years, I would have gone for a longer term at a higher rate. Rates have been like those sucker rates one gets from the credit card companies. 2.9% (until March)! Let's get a plasma TV and some granite while we're at it.Now we can afford to pay 650K for a house – rates will never go up, only the prices will. As seen on TV!Bring on lower prices and I'll sign up at 6%, 7%, 8% for 5 years. That is where rates will end up, and I'd be a lot more comfortable with a 200K mortgage at those rates than I would with a 400K mortgage. People are going to get… Read more »

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RentingSucks

The more of a downpayment you have saved the more this plays right into your hands. You will be less affected by interest rate upswings (your downpayment is not affected by interest) and it will put downward pressure on prices for the low downpayment guys. More downward pressure in fact than for you if you have saved more than most people have saved.Add to that the chance the bubble will get pricked and people will lose a lot of equity from their homes for upgrading might just put you solidly back in the game. In the end I don't think I would mind if they went a few percent higher. People that own and bought in the last couple of years really would mind.I remember when $300,000 dollars looked like a scary and if we get there again through interest… Read more »

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investbee

Generally speaking 1yr to 5yr fixed mortgage rates tend to go up and down, accroding to yields in the bond market. While BoC may still(likely) cut interest rate in 2nd quarter, it will only affect variable mortgage rates, fixed rates can be up OR down. I am looking to renew mine in couple of months, considering perhaps 1-2 yr term.

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the pope

Thanks marco for the link!I'm curious about potential first time buyers: How much will interest rates play a part in your decision to buy?

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