Last week, Royal Bank of Canada lowered its posted five-year fixed rate from 3.89% to 3.74%. It was the first time since October 2017 that Canada’s biggest bank has lowered its mortgage rate.
What’s interesting about the move is that it’s an about-face in terms of how rates have been trending – upward. The Bank of Canada has regularly increased its benchmark rate and mortgage rates have followed in lockstep.
However, it seems homebuyers may be in for a bit of reprieve – at least for now – following RBC’s decision to slash its rate.
And other banks are expected to follow.
“RBC is the largest mortgage lender in Canada, so whenever they move their mortgage rates we can expect that the other four banks will follow suit,” James Laird, president of CanWise Financial, said. “We anticipate that the other big banks will soon have a publicly posted rate of 3.74% as well.
“We have expected this move from lenders since bond yields dropped in December, after the Bank of Canada’s announcement stating that future rate hikes would be slower and less frequent. The most recent Bank announcement highlighted policymakers’ concerns with our energy and housing markets, which suggested to us that rates will be stable for a longer period of time than had previously been anticipated.”
So, homebuyers, at least for now, can expect to save a little money on their mortgage than they would have mere weeks ago.
How Much Will Borrowers Save?
According to Ratehub.ca’s mortgage payment calculator, a homeowner with an $800,000 mortgage and 5-year fixed rate of 3.89% will have monthly mortgage payments of $4,161.
Comparatively, a homeowner with a 5-year fixed rate of 3.74% would have monthly mortgage payments of $4,096.
A 0.15% difference in their mortgage rate would lower mortgage payments by $65 per month or $780 per year.
However, homebuyers can save even more by shopping around. The best mortgage rate in Ontario, for example, is 3.29% for a five-year fixed rate. That’s also the best mortgage rate in BC and Alberta.
It’s a Good Time to Shop Around
The takeaway from this rate news is that potential homebuyers should stay informed about where mortgage rates are and where they might be heading.
“Canadians who need a mortgage this year should check back frequently with rate sites and mortgage providers. As the spring home buying market approaches many lenders will offer deep discounts and promotions in order to attract new customers,” Laird said. “Anyone looking for a variable rate should act quickly, because the current stable interest rate environment is causing lenders to reduce the discounts being offered on variable rate mortgages.”