This just in from our friend Jake Abramowicz:
"Today, TD Bank announced it will increase its own prime rate to 2.85% from 2.7% thus effectively increasing the cost of borrowing for any variable-rate mortgage AND home-equity-line-of-credit (HELOC) mortgage holder by $38 on a typical $500,000 mortgage, per month. That is $2280 more over 5 years. Keep in mind - TD bank can set its own prime rate as can most banks. As a matter of fact, did you know that the actual prime rate is 2.5%? So now the banks have an additional .15 spread over that and what they lend out money at. Awesome! (Don't be fooled - everyone else will follow suit, soon. Real soon.)
Why did TD Bank do this? Most likely in a reaction to the impending risk-sharing that is being tabled which inevitably WILL increase the cost of borrowing for everyone. Most are already speculating the interest rates we see today (average 5 year is 2.49%) will increase to above 3%. That is HUGE. We already know that a return to normal rates will cripple some of us, but nobody is calling for rates to be at 5% (which according to history is "normal"). Even a 1/2% jump in interest rates will send shocks through many borrowers' budgets.
Here's what you need to know:
1. Pre-approvals aren't ever priced at "best rates". So if you have buyers shopping for property, until they secure the property the best rate they will get is 2.49-2.69%. Not bad but not great.
2. This change only affects VARIABLE-RATE borrowers but TD did increase its fixed rates on shorter-terms so may be a sign of thing to come.
3. Come January nobody knows how much higher rates can actually go but everyone believes they will rise. This will undoubtedly cool our Spring housing market (which starts in February, go figure)
Wish I had better news but I'm sharing it as I see it, when I hear it, and putting my spin on it. "
Jake
Jake
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