The big banks have reduced the floating rate discount and small lenders waste little time following their lead.
Over the past few days, several lenders have raised their variable rates between prime minus 0.70% and prime minus 0.50%.
It’s about 20 basis points worse than the heavily discounted variable rates available last week.
At first glance, the new normal for a thrifty floating rate looks like prime minus 0.70% +/- five basis points (i.e. 2.25% to 2.35% effective today).
That said, a few maverick lenders remain with money to lend and a desire to gain market share. For this reason, you may see some lenders and brokers continue to offer better than prime minus 0.70% on a case-by-case basis.
In the fixed market, there is a chance of further rate cuts behind the scenes next week (barring a big jump in bond yields). We’ll wait to see how that plays out to figure out how variable rates stack up.
Suffice it to say that the increase in variable rates has made average terms more attractive from the point of view of hypothetical interest costs. (A “medium term” means a three- or four-year fixed rate.) Hopefully more lenders (besides Industrial Alliance and RBC) are pricing fairly in this part of the yield curve.
Rob McLister, CMT