What to Do Now That TD Canada Trust Has Hiked Its Mortgage Rate

Bank goes at it alone, raising their prime rate on variable mortgages.

It will now take longer for TD Canada Trust customers to pay off their variable mortgages, after the bank raised its prime mortgage rate this week. TD hiked its rate from 2.7 per cent to 2.85 per cent: meaning the total cost of having a variable mortgage with the bank is now more expensive in the long term.

“Increasing our rates is not a decision we take lightly,” said TD Canada Trust. “We consider the impact on our customers before proceeding with any rate change, and we communicate directly with customers whose loans or mortgages are affected.”

The rate increase won’t impact customers with a fixed-rate mortgage from TD Canada Trust.

How to deal with the increase in mortgages

TD Canada Trust told CBC News customers have a choice when adjusting to the new mortgage rate.  If you are affected, you can either:

  • Make no change to your mortgage schedule. Your mortgage will take “slightly longer” to pay back, but monthly costs will stay the same.
  • Increase the frequency of your mortgage payments. You’ll pay off your mortgage in the same or less time, but your monthly costs will go up.

And if you’re near the end of your mortgage term or just in the mood to switch to another bank at a penalty, your chance for savings may be limited by what comes next.

Other banks likely to follow

Banks regularly match each other’s rates, so chances are the other big banks will raise their prime mortgage rates to match TD’s 2.85 per cent.

However, if other banks fail to match, some brokers suggest TD could reverse its rate.

Either way, it doesn't appear that the Bank of Canada is leaning towards changing the national prime lending rate any time soon. The governor of the Bank of Canada has called new mortgage rules, currently being rolled out, a good alternative to a rate hike.

An unexpected move

Usually, banks only hike their prime interest rates when the Bank of Canada hikes its lending rate. Many mortgage brokers are calling this a highly unusual move.

“We regularly review our rates and adjust them based on a number of factors, including the cost TD pays to fund mortgages,” said TD Canada Trust.

The federal government's new mortgage rules will increase the cost for lenders to insure and sell mortgages to investors. Many brokers say it’s likely these new rules prompted TD to increase its rate, and could push other banks to do the same in the next several days.

The rate hike doesn’t affect TD’s other products, such as lines of credit.

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