Article content continued

Banks can respond to increased lending costs by either raising their mortgage prime rate or reducing the discount from posted rates that they are willing to give qualified customers, McLister said.

“All banks are facing higher regulatory-related lending costs (and) likely all banks will reduce their mortgage discounts materially in the next 12 months,” he said.

Earlier this month, Toronto-Dominion Bank led the pack by moving its key prime rate up 15 basis points for variable-rate mortgage customers. The prime lending rate jumped to 2.85 per cent from 2.7 per cent for one segment of the business. Bank of Montreal then boosted discounted rates, a move that affected only new borrowers.

Analysts have said the steps taken by the federal government this year to cool the housing market would raise costs for banks and mortgage insurers — which would most likely be passed on to customers in the form of higher mortgage rates.

The Trump presidency in the United States is also expected to have an impact on rates as bond markets react to expectations of higher inflation, says McLister.

“At worst, (the) prime rate could climb 1 to 1.5-plus percentage points in the next 24-36 months, costing you $1,400 more interest per year for every $100,000 of mortgage,” he said.