TD Has Raised its Mortgage Rates – Will Others Follow?

One of Canada’s largest banks, TD, surprised many when it raised its prime lending rate for variable mortgages. The new rate came into effect on November 1st, 2016 and is a whopping .15 points more than before.

What does this mean for TD's customers?

The new rate of 2.85% will affect all TD customers with variable mortgages. TD says it will now take these customers longer to pay off their mortgages if they stay at their current payments. However, if they want to pay off their mortgage in the same amount of time as at the lower rate, they will need to up their payment amounts or frequency. As with a higher interest rate, a higher portion of their payments will now just go towards paying interest.

What if I don't have a mortgage with TD?

If you have a variable mortgage with another lender, it is possible you might see a rate hike on your mortgage coming soon. Usually, Canada’s big banks don’t have that much of a difference between their prime lending rates. When one changes, the rest follow. It is possible that all of Canada’s big financial institutions will follow TD’s lead and raise their prime lending rate.

However, it is also possible that Canada’s big banks will stay where they are, and TD will feel the pressure to come back down and meet the others once again. This means the rate hike at TD will only be temporary and things will go back to the way they were before.

Did anyone see this coming?

This rate hike came as a surprise to many financial professionals, who say they didn't see the usual signs that a raise was on its way. This means the chances of TD lowering its rate back down to match other lenders is slightly higher than the other banks following TD's lead.

However, there are some people in the finance world who believe the interest rate rise was because of the new mortgage stress test that we talked about previously.

Either way, we should know very soon what will happen.

Do you think TD will come back down or lead the way for other institutions to raise their rates? Let us know in the comments.