What the Royal Bank of Canada mortgage rate uptick means

Royal Bank of Canada rates on several of its mortgages are a little higher today. For instance, the special offer five-year fixed mortgage is up one-tenth of a point to 3.04 per cent.

To make sense of the changes, CBC News spoke by phone with Dan Eisner, the CEO of True North Mortgage. He was in Calgary.

What's behind the increase?

Eisner: What we suspect is the recent changes made by the government back in late December have changed the transactional cost.

These changes were very technical in nature, but in the end they resulted in a higher funding cost for banks. And we believe that those higher funding costs is what's driving the mortgage rate upwards in the last few days and we expect to see many of the other banks follow suit.

Is this the beginning of a trend where rates are going to start rising again?

Eisner: I imagine it's a one-time correction … to offset these higher funding costs. The real question is when will TD and BMO and CIBC follow suit behind RBC?

What advice are you offering homebuyers concerned by this increase?

Eisner: If you're in the housing market and looking for a mortgage right now, now's a great time to get a pre-approval. And we have really seen a big increase, uptick in the number of pre-approvals and mortgage approvals that we've done in the last week, since this RBC announcement.

So now would be a good time to get that rate hold in, because we could still get you a rate hold with today's rates rather than next week's rates.

What about people who've already got a mortgage?

Eisner: For those clients who are already in a five-year fixed rate, nothing to do. You probably have a good rate already and there's nothing you need to worry about.

For those clients who are in a variable rate right now who have the option to lock in at any time, if they're on the fence about locking in, now might be the good time to make that call to their bank to find out what rate they can lock into and make that change and lock in their rate right now.

What about people whose mortgages are coming up for renewal soon?

Eisner: The only thing they need to worry about is if they happen to be in a five-year fixed rate and they happen to be renewing in the next little while, then they might be a little concerned by this.

But really, a five-year fixed rate is really a fire-and-forget type of mortgage where you pick your rate once and just live with it for the next five years.

Have you seen any impact from this rate increase?

Eisner: We've already seen our phones ring off the hook lately with the fear of a rate increase. So we've already seen that happening.

As for kind of the long term, usually when we see something like this all we see is people who were going to buy maybe in a month or get pre-approval in a month from now are doing it today.

So really it kind of pulls the market forward a month or two. But a 0.2 increase is not going to be enough to change fundamentally housing prices and the buyers in Canada.