Yet another hike in bond yields is driving fixed rates even further up the scale. Today one of Canada’s largest banks announced that they will be increasing their fixed rates. TD Canada trust bumped their 5 year fixed rate (along with their 4 and 3 year) to 5.85% which is 0.60% higher than it was 9 months ago. This is the largest increase in almost a year and if history repeats itself we can expect to see the other large banks follow suite within the next day or two.
Although higher interest rates bring the amount one can qualify down and the amount of interest one will pay up... there is still a bright side for some. First of all, independant brokerages can offer competitive rates which can often beat out the larger bank rates. Also, for anyone who is currently in a closed fixed rate mortgage which they are looking to break or re-finance, their IRD penalties will decrease as rates go up.
IRD penalty: Interest Rate Differential
- Penalty for paying out a mortgage prior to maturity date
- Penalty is usually 3 months interest or the interest rate differential (whichever is higher for fixed rate mortgages while variable rate mortgages do not have IRD penalties)
- Based on an formula used to calculate an interest rate that equals the difference between the original mortgage rate and the rate the lender can charge today
- IRD penalties formulas can fluctuate between lenders so be sure to request your statement
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The Mortgage Centre