November 2, 2016

TD Hikes Its Mortgage Prime Rate

TD Canada Trust has quietly increased its mortgage prime rate to 2.85%, which is 15 basis points higher than what the other Big Five banks are advertising.

Customers with a variable-rate mortgage will be affected by the change, but those with a fixed-rate mortgage or a home equity line of credit will not.

Will You Pay More For Your Mortgage?

With a variable-rate mortgage, the rate is related to the bank’s prime rate (in this case, it’s the TD mortgage prime rate). Your mortgage rate moves up or down when the prime rate changes. A bank’s prime rate is usually tied to the Bank of Canada’s benchmark interest rate, which has stayed the same since July 2015. The difference here is that TD’s mortgage prime rate increased while its regular prime rate remained at 2.7%.

Anticipating Mortgage Changes

James Laird, president of CanWise Financial, says TD probably increased its mortgage prime rate because it’s anticipating higher lending costs. Last month, the Finance Department announced new mortgage rules and it also proposed lender risk sharing for insured mortgages. Both changes are expected to lead to an increase in mortgage rates. By raising the mortgage prime rate, TD can pass on those anticipated costs to its customers with variable-rate mortgages.

For those with a variable-rate mortgage at TD, their mortgage payments will either increase or a higher proportion of their payment will go towards the interest portion of their payment. If you have a variable-rate mortgage at another financial institution, there won’t be a change for the time being. However, other lenders may follow TD’s lead and also raise rates. (Be sure to check the best mortgage rates before getting a mortgage.)

A History of Higher Rates

This isn’t the first time TD has bucked the trend. When the Bank of Canada cut interest rates in July 2015, TD lowered its rate by 10 basis points to 2.75%. But the other banks lowered their prime rates by 15 basis points to 2.7%. TD soon followed suit later that day and cut its prime rate to 2.7%.

The Bank of Canada will make its next interest rate decision on Dec. 7.

RateHub.ca is a website that compares mortgage rates, credit cards and deposit rates with the goal to empower Canadians to search smarter and save money.