Apr 27

A Prime Rate Increase Warning?

ratesThis week a few Mortgage Lenders have announced an increase in Variable Rate Mortgage Rates. The Premium under Prime Rate has been decreased (that means an increase in the rate borrowers pay on new mortgages). For example, what was priced at Prime minus .65% is now being priced at Prime minus .40%–a rate increase of .25%.

Is this a warning of an increase in Prime Rate?

It is an indication that Lenders’ costs of “Short Term” funds are increasing along with the recent increases in “longer term” rates.

Many economists have been predicting an increase in Prime Rate for as early as the May Bank of Canada rate set meeting (May 31st, 2011). With the election over and done, will Prime Rate increase after May 31st? We’ll have to wait and see.