TORONTO – TD Bank (TSX:TD) is raising the interest rate it charges customers with variable-rate mortgages.
The bank is increasing its TD Mortgage Prime rate to 2.85 per cent from 2.7 per cent, effective Tuesday.
Customers with fixed-rate mortgages are unaffected by the change.
TD’s prime rate for other products with a variable interest rate, such as lines of credit, are not affected as that rate remains at 2.7 per cent.
Borrowers with variable-rate mortgages often negotiate a discount to the prime rate, but the rate they pay still goes up and down as the prime rate changes.
The increase means borrowers with variable-rate mortgages at TD will see a larger portion of their mortgage payment go toward paying interest instead of repaying principal if their payment remains the same.
TD’s prime rate had been at 2.7 per cent since July 2015 when it was cut in the wake of a decision by the Bank of Canada to reduce its overnight rate target by a quarter of a percentage point to 0.5 per cent.
TD initially lowered its rate to 2.75 per cent from 2.85 per cent following the July 2015 central bank decision, but later cut it to 2.7 per cent to match the moves by the other big Canadian banks.