Don’t blame TD for being the first to act, argues one veteran, but do expect further interruption to the industry that will make mortgages more expensive for the consumer.

“We’ve been talking about this in the mortgage world for a while now. All these mortgage changes affect the monolines; all these capital requirements require rate increases and there are going to be capital requirement changes on the insurers. “Finally, in the end, there is going to be risk sharing, which requires more capital requirements.  At the end of the day, all of the stuff requires higher rates.”

TD Bank was the first lender to act in response last month’s mortgage rules changes.

The bank announced in a note to brokers Tuesday that it was changing its mortgage rates, including increasing its mortgage prime rate to 2.85%.

And according to Butler, the other banks might follow suit.

“Starting in January, banks are going to be required to assign more capital to mortgages.  All these banks are going to be pushed in some sort of direction to raise rates because of these capital requirements on the hot marketplaces,” he said. “But this is their first step – [TD was] just putting this out there and praying that the other banks will go.”

Raising rates is a natural reaction to the recent changes, Butler argues, and the lenders shouldn’t be blamed for passing the expense onto customers.

After all, no successful business will just eat the cost and settle for less profit.

“This is the result of the government’s moves. The government is increasing capital requirements in different layers and different levels of the mortgage business. And by doing so, they require banks to raise rates,” Butler said. “Every business passes government regulation change onto the consumer. TD is doing this because they feel they have to; there is a logical reason behind it based on capital requirements and other banks may change or may not.

“My position is this was not a TD thing. It’s not like TD is going to grab more profit off this.”