Broker fears were confirmed Tuesday, with one big bank raising its prime rate less than a month following new mortgage rules.

TD Canada Trust announced in a note to brokers Tuesday that it is changing its mortgage rates, including increasing its mortgage prime rate to 2.85%.

The prime rate has been held at 2.70% for more than a year, according to the broker who shared the announcement with MortgageBrokerNews.ca on condition of anonymity.

“When a bank changes their ‘version’ of bank prime it also serves as an invitation for the other banks to join in and do the same,” the broker said. “Naturally if they all change the public is screwed and all the banks make more profit.

“You see by effectively changing the goal posts on the rate the bank can continue to say: ‘we are prime less 0.50% which is a good deal.’  So as you can see this a clever move if it works.”

The announcement also confirms what one economist speculated – that big banks could influence the market by altering posted rates.

The new mortgage rate stress test, which forces all holders of insured mortgages to qualify at the Bank of Canada’s benchmark five-year rate.

The Bank of Canada’s benchmark rate is closely tied to big bank posted rates. And that relationship could allow lenders to tinker with their posted rates in a bid to influence the BoC’s, thereby allowing them to also influence the ease with which homebuyers can qualify for an insured mortgage.

“Another possible solution is that posted rates could fall, reducing the impacts of the stress tests. Since they are not set by the market, lenders could decide to lower them if, for example, they find that they are saying “no” to too much good business,” Will Dunning, chief economist of Mortgage Professionals Canada, wrote in a research paper entitled Slamming on the Brakes: Assessing the Impact of Changed Criteria for Mortgage Qualification. “The posted rates are set administratively by the lenders, based on their assessments of what is in their best interests, and their assessments could change.”

The new mortgage rules are certain to result in a slowdown in the Quebec housing market, the body representing the province’s real estate boards says.

The Quebec Federation of Real Estate Boards (QFREB) has significantly downgraded its market outlook for 2017 and says the short-to-medium-term impact of Ottawa’s rules are definite.

“The impact on the number of sales will be, at a minimum, as great as the 2012 tightening of the mortgage rules which reduced the maximum amortization period from 30 to 25 years,” explained Paul Cardinal, Manager of the QFREB’s Market Analysis Department.

The Federation also believes there is a real risk to home prices in the province which would likely result in a negative impact on consumer confidence.

The mortgage stress test will particularly hit first-time buyers, the Federation says, while the risk-sharing rule will mean higher mortgage rates.