Did Prime go up?
No.
Did my Variable rate mortgage rate change?
No, not unless your variable rate mortgage is with TD.
So the Bank of Canada did not raise rates?
No, in fact they are more likely to lower rates than increase them.
But TD raised rates?
Yes, but only by 0.15% and only for variable rate mortgage holders.
If you are a TDCT client in a variable rate mortgage at TD then read on…
Update RE TD Variable Rate mortgage rate changes
On Nov 1st, 2016 TD announced their own private rate increase affecting just one exclusive group of TD clients. Specifically those in a TD variable rate mortgage.
While the rate adjustment may be minor, at only 0.15%, it is still a change, and nobody likes change.
Does this mean immediate action should be taken?
No.
Does this mean that going variable was a mistake?
No.
Is this change going to stick?
At this point (Nov 11, 2016) no other lenders have followed suit, and TD is effectively all alone on this move. As such TD may back down and reverse the increase.
For those of you with a discount of Prime -0.60% or better, you are still laughing. Such a discount leaves you with a net rate of 2.25% which can only be matched by a two year fixed rate product. And if you have such a discount the odds are you have been enjoying it for some time now as well. Racking up the savings!
For those whose net rate has risen above the 2.25%, keep in mind some of the key features of the TD variable rate product in particular that may make it worth the extra few dollars: You did not wind up in this product with this institution by accident.
The TD variable is a Fixed Payment product, which means your effective payments will remain the same. This is meaningful if the subject property is an investment property as well – no change to your monthly cash-flow.
The TD variable is nearly the only product that can be converted into a 3-year fixed from day one. (Currently ~ 2.29% – but this is just an example, not a suggestion for action) There are greater options with TD than with other lenders.
The pre-payment penalty to break this mortgage is only ~0.50% of the balance, about nine times less than the penalty to break out of their 5-year fixed product (which 60% of clients wind up doing). Keep this in mind before locking in, I am not locking my TD variable in anytime soon.
TD is the only lender that gives you 12 months to find a new home to move the mortgage over to and grants a full penalty refund…even if they give you a deeper discount on the new mortgage! That’s right, a full penalty refund up to a year later, and possibly and even deeper discount!
What is this increase costing me?
A 0.15% increase results in an interest-expense cost increase of $12.50 per $100,000 outstanding.
Got a $300,000.00 mortgage? Then your payment just went up by zero, but the interest component within your payment did go up by $37.50 per month.
Is the Bank of Canada going to raise Prime too?
Highly unlikely by all current estimates. Said estimates being made by people far smarter than myself.
Will TD raise their own Prime rate further?
This also seems unlikely.
Will TD lower their Prime back to 2.70% to get in line with ALL of the other financial institutions?
Perhaps if TD gets enough pressure from clients they will – and this is where I suggest a call to your TD branch to express your displeasure with them being the only bank to do this to their clients. And only to their mortgage clients.
Do you have an unsecured credit line? Car loan, TD credit card? All good they left the interest rates the same on those. What’s that, you carry no high interest debt? Yep, TD is sparing the folks with consumer debt and only coming after those with mortgage debt. A touch ironic for sure.
If you wish to call TD directly. Look up the local branch here, press ext ‘250’ and this will connect you to the branch manager directly.
This is a phone call that may result in some action – or you can always call your local Dominion Lending Centres mortgage professional for more information.