CIBC latest big bank to raise five-year variable mortgage rate to prime

TORONTO – CIBC (TSX: CM) joined other big banks Wednesday in raising its five-year variable mortgage rate to sit even with its prime rate in a move that reflects higher costs of borrowing on the bond market.

The 0.15 percentage point increase is effective Friday on its five-year variable flex mortgage.

Royal Bank of Canada (TSX:RY) hiked the rates charged on its five-year variable closed mortgages by a fifth of a point to put it even with prime, while Bank of Montreal (TSX:BMO) raised its by 0.15 percentage points to prime.

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In the past when banks raised variable rates without a corresponding increase in the Bank of Canada rate, they were accused of trying to boost profit margins at the expense of borrowers.

But Royal Bank, which is also Canada’s largest mortgage lender, said the latest increase reflects higher costs in the bond market, where it raises money to finance its mortgage loans.

Bond interest rates have risen due to growing debt fears in the United States and Europe as lenders want higher rates to part with their money in a riskier global economy.