Banks Have Canceled their 4-year Promos – Rates on the rise.

Still time to get a rate hold at the old rates if you hop to it.

The banks 2.99% four-year fixed promotions were intended to last until February 29. RBC and others have cancelled them early.

The nation’s banks rates are now:

• 4-year fixed “special offer” by 40 bps to 3.39% – ours is at 2.99% – live deals only, closing in 30 days or less
• 5-year fixed “special offer” by 10 bps to 4.04% – ours is at 3.09% / 3.25% – live deals only, close in 30 days or less
• 5-year fixed posted rate by 10 bps to 5.24% – ours is at 3.29%, 120 day rate hold

Some quick points on these changes:

• Other major banks are expected to match some or all of RBC’s rate increases.
• For just 10-20 bps more (i.e., 3.09-3.19%) you can find several brokers offering 5-year fixed mortgages. That’s a reasonable premium for one extra year of rate protection.
• RBC’s 4.04% five-year “special offer” is almost a full point above 5-year fixed rates on the street. No one other than the most novice mortgage shoppers take this rate seriously.
• RBC spokesman Matt Gierasimczuk attributed today’s rate increases to this:

“Our long-term funding costs have gone up considerably due to global economic concerns and, while we have held off in passing on these rate changes to our clients, it is now necessary for us to increase this mortgage rate.” (Source: Bloomberg)

• We can find nothing to suggest RBC’s 4-year fixed funding cost rose 40 basis points since mid-January. It has among the lowest cost of capital in Canada and other lenders have recently launched new 2.99% four-year specials of their own (one of them today). That is some pretty bad spin they are trying to put on.
• The Globe and Mail quotes sources who say that regulators were unhappy with the “price war” that followed BMO’s 2.99% five-year special. That may be somewhat linked to this announcement, hints the article. The government is clearly worried that low rates may incite borrowing and inflate the debt balloon further.