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Royal Bank

Locked: RBC new 3-4-5 year mortgage rates

  • Last Updated:
  • Oct 27th, 2020 11:44 pm
Jr. Member
Aug 1, 2010
113 posts
60 upvotes
Speedwell wrote: In past Bank of canada had said many a times they have no plans to change rates for X months but they have changed it before said time. It will all depend on economy and inflation. To be honest no model can predict Covid-19 scenarios as this is kind of first in recent human history accurately.

between Fixed Vs Variable heres what i will do.

IF i expect to break my term. No questions go variable.

IF i expect not to break my term. Lock in lower fixed rate there is not much difference between Fixed Vs Variable. Currently Variable is give you advantage of ~ 20 bps. IF you are locked in for 5 years and IF rate goes up lets says after 2 years by 0.5 years and then by the end of your term by another 0.25 year. Calculate how much interest you would have saved and remember you would have paid down more of your principal. This scenario is based on assumption that rates will go up by 0.75% in term of 5 years which i think is realistic at some point we will be back to before covid-19 scenario. So in my calculation i expect till 8/22 i pay ~20bps more vs variable then rate goes up by 0.5 till another 2 years i.e. 8/24 and for last year rate goes up again by 0.25. If i simulate this Fixed rates comes out as winner.

Another possibility if anyone is completely sold on rate is not going to go up until 2023 is that go for 2 years for now then lock in lower rate before it goes back up in 2023. This is high risk but better reward as you may get lower rate for longer. Having said that i am not sold on that rates won't go up until 2023. I think come 2022 we will see rates going up.

Personally i am going with fixed approach. As i expect variables rates to be up by atleast 0.75 (before Covid-19 levels) in next 5 years.
I was offered 1.89% 5 years fixed by TD for a refinance or 1.85% 5 years variable.

A difference of 0.04% is a no brainer to go for 5 years fixed for me.

Assuming it is true that no rate increases until fall of 2023.
I would assume a +0.25% increase in the fall of 2023 and another +0.25% in 2024.

This math is not exact as it does not take into consideration capital payment differences but a quick napkin math :
Overpaying from fall 2020 to fall 2023 = 3x0.04% = 0.12%
Savings from rate increases from fall 2023 to fall 2025 = 1x(0.25%-0.04%) + 1x(0.5%-0.04%) = 0.67%

Net savings = 0.67% - 0.12% = 0.55%

I would need variable to be at least 0.25% lower than fixed rate for me to consider variable 5 years right now (so 1.64% in the above example).
In this case, with the above scenario the net savings would still be -3x0.25%+0+0.25%=-0.5%, so effectively overpaying by 0.5% over 5 years, or to put it in another way : potential savings if I go with a variable that is 0.25% lower than the five years fixed of 1.89%

Given that the scenario mentioned above is in my opinion the most conservative scenario (I can't imagine anything less than 2 rate increases over the next 5 years), 0.25% discount over the five years fixed rate is where it starts to be interesting to go with variable.
Member
Mar 25, 2018
420 posts
503 upvotes
navin2004 wrote: From what I understand about Fixed Rate Mortgage break penalty, which is why I have not opted for one as I still have 2.5 years left on my 3.05 mortage.
For the remaining term of my current mortage(i.e 2.5 years), I am not going to get advantage of lower rate. Bank is basically going to ask me to pay the difference in interest it would have made off of me versus the lower rate now.
But they will show that you are getting ahead by saying, you can roll this penalty into your mortgage principle and how your monthly payments are not changing.
What essentially you are gambling on is that 2.5 years from now, the Fixed interest rate will be higher than what the rate is today.
Who knows, so why would I pay this insane penalty now to bank. I will rather take my chance and see.
I have seen this pretty well, 5 years ago I took my mortgage from RBC to BMO as they were giving me shitty rate on renewal. Same thing is happening now with my second mortgage at BMO which is coming up for renewal. They are giving decent rate, but not waiving the appraisal fee + legal fees to convert into HELOC upon renewal, while other banks are giving upto $1000k to cover the switch.
Onboarding a new customer gets money and resources at most of these companies(banks, cell phone, internet providers) versus retaining customers. Front line reps have very little authority to do anything to retain.
If you get a blended rate, you do not have to pay penalty nor your capital will increase. If the rates are pretty low, then it makes sense to get a blended rate. For an example, in my case, my original interest rate was 3.5% and I had 42 months left. They gave me 2.85% rate to renew it for 60 months. Only downsides are if the rates are pretty low at the end of 42 months and if I want to sell it earlier.
Member
Jul 7, 2012
291 posts
55 upvotes
Kanata
price31 wrote: I was offered 1.89% 5 years fixed by TD for a refinance or 1.85% 5 years variable.

A difference of 0.04% is a no brainer to go for 5 years fixed for me.

Assuming it is true that no rate increases until fall of 2023.
I would assume a +0.25% increase in the fall of 2023 and another +0.25% in 2024.

This math is not exact as it does not take into consideration capital payment differences but a quick napkin math :
Overpaying from fall 2020 to fall 2023 = 3x0.04% = 0.12%
Savings from rate increases from fall 2023 to fall 2025 = 1x(0.25%-0.04%) + 1x(0.5%-0.04%) = 0.67%

Net savings = 0.67% - 0.12% = 0.55%

I would need variable to be at least 0.25% lower than fixed rate for me to consider variable 5 years right now (so 1.64% in the above example).
In this case, with the above scenario the net savings would still be -3x0.25%+0+0.25%=-0.5%, so effectively overpaying by 0.5% over 5 years, or to put it in another way : potential savings if I go with a variable that is 0.25% lower than the five years fixed of 1.89%

Given that the scenario mentioned above is in my opinion the most conservative scenario (I can't imagine anything less than 2 rate increases over the next 5 years), 0.25% discount over the five years fixed rate is where it starts to be interesting to go with variable.
Shouldn't you look at the actual interest amount being paid instead of doing simpler percentage based maths? I did rough calculation in my case and the price difference between 5-yr variable and 5-yr fixed at HSBC with their current public rates is 900 bucks over 5 years.

I would not discount the rates going down due to COVID-19 between now and 2023.

I have to decide very soon (next few days) whether going for variable or fixed. I was on fixed in my first 5 years, then variables for the last 3, planning on going for a 5-year period now.
Newbie
Feb 8, 2019
43 posts
13 upvotes
Borisnet wrote: Shouldn't you look at the actual interest amount being paid instead of doing simpler percentage based maths? I did rough calculation in my case and the price difference between 5-yr variable and 5-yr fixed at HSBC with their current public rates is 900 bucks over 5 years.

I would not discount the rates going down due to COVID-19 between now and 2023.

I have to decide very soon (next few days) whether going for variable or fixed. I was on fixed in my first 5 years, then variables for the last 3, planning on going for a 5-year period now.
Yes actual number will give better picture. In my case I will save about 4202 on monthly payments + would have paid down 2900 more on principal if I go fixed @ 1.87 vs variable for 24 months @1.75 another 24 months @ 2.25 and last 12 months @ 2.5 total increase of 0.75. To break even my starting variable needs to be 1.50 which I don’t think may happen. Probability of it going more than 0.75 over 5 years is more than variable going down 1.50 and not going back up more than 0.75 is low I think. It can go otherwise too but that is what I am going with anyways.
Jr. Member
Aug 1, 2010
113 posts
60 upvotes
Borisnet wrote: Shouldn't you look at the actual interest amount being paid instead of doing simpler percentage based maths? I did rough calculation in my case and the price difference between 5-yr variable and 5-yr fixed at HSBC with their current public rates is 900 bucks over 5 years.

I would not discount the rates going down due to COVID-19 between now and 2023.

I have to decide very soon (next few days) whether going for variable or fixed. I was on fixed in my first 5 years, then variables for the last 3, planning on going for a 5-year period now.
100% but for those who don't want to do an amortization table this is a quick napkin math way of calculating, should give you a good ballpark where the breakeven is.

I did mention from the beginning that it's not the exact way of calculating as it doesn't take into consideration principal payment, I just like this simple way to explain to those who are not used to dealing with the whole amortization table math. I also do it quickly in my head when being offered something on the spot.
Jr. Member
Aug 1, 2010
113 posts
60 upvotes
Speedwell wrote: Yes actual number will give better picture. In my case I will save about 4202 on monthly payments + would have paid down 2900 more on principal if I go fixed @ 1.87 vs variable for 24 months @1.75 another 24 months @ 2.25 and last 12 months @ 2.5 total increase of 0.75. To break even my starting variable needs to be 1.50 which I don’t think may happen. Probability of it going more than 0.75 over 5 years is more than variable going down 1.50 and not going back up more than 0.75 is low I think. It can go otherwise too but that is what I am going with anyways.
1.5 being breakeven vs 1.87 five years fixed is quite close to the napkin math :
2*(1.50-1.87)+2*(2.00-1.87)+(2.25-1.87) = -0.1
Member
Oct 13, 2016
213 posts
172 upvotes
To be overly dramatic as I read in another thread, we are in the middle of the largest global government financial intervention in the history of humanity. All those CERB payments have to come from somewhere after all...

There's a clear trend where debt to GDP is heading and a clear trend can be noted between interest rates and debt to GDP. Just look at rates in developed countries ahead of Canada on the debt to GDP scale.

There came a point where looking back historically at 7+% interest rates became irrelevant. Is it possible we've passed the point where even 3% rates are now irrelevant? Its certainly possible.

My point being, perhaps there's a certain outlook banks have, leading to them looking to lock in customers at these at the moment great 5 year fixed rates barely above variable.
Last edited by GlennButerol on Aug 17th, 2020 1:29 pm, edited 1 time in total.
Newbie
Jul 4, 2018
46 posts
52 upvotes
London
willy0275 wrote: Anyone managed to get a HELOC with RBC that's better than Prime + 0.50%? My broker is saying that's pretty much as good as it can get with RBC but just wanted to check. I don't really intend to use it but would like to maximize my deal.
I just got the exact same rate.
Is it possible to get a HELOC type of credit from other vendors? Not the banks obviously (because I believe they don't do second mortgages) but how about private lenders?
I'm trying to get my existing equity and invest in a rental property just to take advantage of the lower rates:)
Love hustling stuff
Member
Oct 23, 2013
319 posts
699 upvotes
Toronto
price31 wrote: I was offered 1.89% 5 years fixed by TD for a refinance or 1.85% 5 years variable.

A difference of 0.04% is a no brainer to go for 5 years fixed for me.

Assuming it is true that no rate increases until fall of 2023.
I would assume a +0.25% increase in the fall of 2023 and another +0.25% in 2024.

This math is not exact as it does not take into consideration capital payment differences but a quick napkin math :
Overpaying from fall 2020 to fall 2023 = 3x0.04% = 0.12%
Savings from rate increases from fall 2023 to fall 2025 = 1x(0.25%-0.04%) + 1x(0.5%-0.04%) = 0.67%

Net savings = 0.67% - 0.12% = 0.55%

I would need variable to be at least 0.25% lower than fixed rate for me to consider variable 5 years right now (so 1.64% in the above example).
In this case, with the above scenario the net savings would still be -3x0.25%+0+0.25%=-0.5%, so effectively overpaying by 0.5% over 5 years, or to put it in another way : potential savings if I go with a variable that is 0.25% lower than the five years fixed of 1.89%

Given that the scenario mentioned above is in my opinion the most conservative scenario (I can't imagine anything less than 2 rate increases over the next 5 years), 0.25% discount over the five years fixed rate is where it starts to be interesting to go with variable.
Going by your assumptions that there will not be a rate increase until at least fall of 2023, wouldn't it make more sense to go variable now until fall of 2023 as you are enjoying the lower rates for another 2 years (at variable mortgage) and then convert to a fixed mortgage sometime in 2023, that way you are paying low rates from now to 2023 and another 5 years of fixed low rates, 2023 - 2028?

For example:
2020 - 2023 - variable rates at 1.85%
2023 - 2028 - fixed 5 year at 1.XX% or even 2.XX%

Instead of:
2020 - 2025 - fixed 5 year at 1.89%
2025 - 2030 - fixed/variable 5 year at 2.XX%
Jr. Member
Aug 1, 2010
113 posts
60 upvotes
unlocknow wrote: Going by your assumptions that there will not be a rate increase until at least fall of 2023, wouldn't it make more sense to go variable now until fall of 2023 as you are enjoying the lower rates for another 2 years (at variable mortgage) and then convert to a fixed mortgage sometime in 2023, that way you are paying low rates from now to 2023 and another 5 years of fixed low rates, 2023 - 2028?

For example:
2020 - 2023 - variable rates at 1.85%
2023 - 2028 - fixed 5 year at 1.XX% or even 2.XX%

Instead of:
2020 - 2025 - fixed 5 year at 1.89%
2025 - 2030 - fixed/variable 5 year at 2.XX%
In theory yes, the problem is that it is very difficult to project what the fix rates will be available in 6 months let alone 1 year or 2 years. The variable rate is "easier" but not that easy either to predict since it is directly based off of BoC's decision to increase rates (usually).
Deal Addict
User avatar
Jul 6, 2007
2758 posts
1857 upvotes
Niagara On The Lake
On paper, your argument makes sense but in reality, it can be very different or even disastrous. Remember the 5 Year bank of Canada fixed is 4.79%. There is no explanation or crystal ball to predict, when banks will pull the discounted fixed rates off the table and start raising them. My CIBC mortgage specialist told me of this. By going variable, you maybe playing Russian Roulette. 1.89% 5 Year fixed with no restrictions is one hell of a great deal if you qualify. My wife being staff, we got 1.82% 5 year fixed and the paper work is being done today.

Finally and most important. Earnings season is coming up next week and banks are scrambling to show profit and revenue to beat or meet forecast estimates.

unlocknow wrote: Going by your assumptions that there will not be a rate increase until at least fall of 2023, wouldn't it make more sense to go variable now until fall of 2023 as you are enjoying the lower rates for another 2 years (at variable mortgage) and then convert to a fixed mortgage sometime in 2023, that way you are paying low rates from now to 2023 and another 5 years of fixed low rates, 2023 - 2028?

For example:
2020 - 2023 - variable rates at 1.85%
2023 - 2028 - fixed 5 year at 1.XX% or even 2.XX%

Instead of:
2020 - 2025 - fixed 5 year at 1.89%
2025 - 2030 - fixed/variable 5 year at 2.XX%
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Sr. Member
Sep 29, 2008
787 posts
666 upvotes
StealthFinder wrote: On paper, your argument makes sense but in reality, it can be very different or even disastrous. Remember the 5 Year bank of Canada fixed is 4.79%. There is no explanation or crystal ball to predict, when banks will pull the discounted fixed rates off the table and start raising them. My CIBC mortgage specialist told me of this. By going variable, you maybe playing Russian Roulette. 1.89% 5 Year fixed with no restrictions is one hell of a great deal if you qualify. My wife being staff, we got 1.82% 5 year fixed and the paper work is being done today.

Finally and most important. Earnings season is coming up next week and banks are scrambling to show profit and revenue to beat or meet forecast estimates.
I don't understand how people are saying 1.8% is a great deal. My variable which i renewed in May is 1.4% right now.
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Jul 6, 2007
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Sadly there is no time machine. A few weeks ago (maybe 2 months) banks were offering 5 year variable at Prime minus 1% and you could have been a lucky one to seize that opportunity. Not many people have the flexibility to early renew or break an existing mortgage without incurring heavy penalties. I know I had 150 days and the earliest I could was mid July.
crunchiespg wrote: I don't understand how people are saying 1.8% is a great deal. My variable which i renewed in May is 1.4% right now.
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Oct 3, 2006
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crunchiespg wrote: I don't understand how people are saying 1.8% is a great deal. My variable which i renewed in May is 1.4% right now.
Unless you provide details on how you got variable at that rate and from whom, you're just bragging as you're not helping ayone. Also, many folks are not comfortable with variable and there's still a risk factor.
Many of us are at 3+% (me included) so these deals are great. There are also conditions and such to consider when getting/renewing mortgages that can make or bake one's decision to jump in.
To get 1.8% from a Major Canadian bank that one trust is truly fantastic.

It kinda reminds me when someone posts a deal and folks say "it's not as good as the deal xx months / years ago".
This is what's available *NOW* and many of us were not privileged to get super amazing deals if they even existed

Don't deflate people's enthusiasm just because you (may) have scored a better deal. 1.8% is amazing to us. Deal with it.
Deal Addict
Jan 19, 2003
1007 posts
412 upvotes
nambit wrote: Unless you provide details on how you got variable at that rate and from whom, you're just bragging as you're not helping ayone. Also, many folks are not comfortable with variable and there's still a risk factor.
Many of us are at 3+% (me included) so these deals are great. There are also conditions and such to consider when getting/renewing mortgages that can make or bake one's decision to jump in.
To get 1.8% from a Major Canadian bank that one trust is truly fantastic.

It kinda reminds me when someone posts a deal and folks say "it's not as good as the deal xx months / years ago".
This is what's available *NOW* and many of us were not privileged to get super amazing deals if they even existed

Don't deflate people's enthusiasm just because you (may) have scored a better deal. 1.8% is amazing to us. Deal with it.
This!

Also @crunchiespg you can't give a rate in isolation! Insured or not insured? LTV? Renewal or new purchase? Term? Owner-occupied etc etc etc.
Sr. Member
Sep 29, 2008
787 posts
666 upvotes
StealthFinder wrote: Sadly there is no time machine. A few weeks ago (maybe 2 months) banks were offering 5 year variable at Prime minus 1% and you could have been a lucky one to seize that opportunity. Not many people have the flexibility to early renew or break an existing mortgage without incurring heavy penalties. I know I had 150 days and the earliest I could was mid July.
The same deal is still being offered right now.
nambit wrote: Unless you provide details on how you got variable at that rate and from whom, you're just bragging as you're not helping ayone. Also, many folks are not comfortable with variable and there's still a risk factor.
Many of us are at 3+% (me included) so these deals are great. There are also conditions and such to consider when getting/renewing mortgages that can make or bake one's decision to jump in.
To get 1.8% from a Major Canadian bank that one trust is truly fantastic.

It kinda reminds me when someone posts a deal and folks say "it's not as good as the deal xx months / years ago".
This is what's available *NOW* and many of us were not privileged to get super amazing deals if they even existed

Don't deflate people's enthusiasm just because you (may) have scored a better deal. 1.8% is amazing to us. Deal with it.
I already did a few pages back and no one acknowledged it. Mine was a renewal through Merix. But speaking to broker friends there are lots of prime -1% or better available. That was my point. The banks rarely offer the best deals.
vg19 wrote: This!

Also @crunchiespg you can't give a rate in isolation! Insured or not insured? LTV? Renewal or new purchase? Term? Owner-occupied etc etc etc.
5 year variable. Less than $1000 to break the mortgage should we want out. We have about 40% equity, but as mentioned above my deal is nothing special. Anyone with good credit should be getting similar according to brokers I know. Just don't expect the banks to give you a good deal directly.
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Jul 4, 2005
9018 posts
2816 upvotes
Ottawa
sooo is there a nice calculator to help determine break-even point? I'm with Meridian CU on 2.5/5yr fixed @ 3%. They told me penalty is $12K, I wanna plug in my numbers to work out the math..
Deal Addict
Apr 13, 2006
1136 posts
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Mississauga
maggiepalmer wrote: Thanks Kiz5! Got 1.91 on 5 year refinance at CIBC!
:) Happy to help.
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Aug 5, 2015
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Montreal, QC
crunchiespg wrote: But speaking to broker friends there are lots of prime -1% or better available.
Can you back this up with some links or it's just "some broker friends" ? I follow rates a lot and I don't believe that "lots of prime -1% or better are available", especially for uninsured mortgages.
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Sr. Member
Sep 29, 2008
787 posts
666 upvotes
willy0275 wrote: Can you back this up with some links or it's just "some broker friends" ? I follow rates a lot and I don't believe that "lots of prime -1% or better are available", especially for uninsured mortgages.
Get any broker who deals with Merix, that I know for sure. Other than that I don't know specifics. But just chatting to some friends in that industry as we are moving provinces next month so have been looking at some options for that. They all said sub 1.5% is common right now. YMMV I guess.

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