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By Special to MoneySense on September 10, 2014
Estimated reading time: 2 minutes

BMO reintroduces 2.99% 5-year, fixed rate mortgage

By Special to MoneySense on September 10, 2014
Estimated reading time: 2 minutes

Smaller lenders offering even lower rates

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Image courtesy of Stuart Miles / FreeDigitalPhotos.net

TORONTO – The Bank of Montreal has slashed its five-year, fixed mortgage rate to 2.99 per cent, a level that had previously raised concerns about it leading to an overheated housing market. The bank (TSX:BMO) says it will offer the new rate until Sept. 30. “This rate change is driven by the fact that bond yields have fallen and we are in what is another busy season for buying a home,” said BMO spokesman Paul Gammal on Wednesday. Previously, BMO’s five-year, fixed rate had been 3.29 per cent. The bank raised concerns from Ottawa when it offered the 2.99 per cent rate in March 2013. The move sparked a personal phone call from then-finance minister Jim Flaherty, who publicly chided the bank for lowering its key five-year rate, saying that he believed in “responsible lending” and was worried that the low rate would result in a race to the bottom with the other major banks. Flaherty’s general concern was that the low rate would encourage Canadians to take on unsustainable loans and work against the government’s efforts to slow the momentum of the housing market. Last March, BMO cut its five-year, fixed rate to 2.99 per cent again, but raised it to 3.29 per cent a month later on April 29. At the time, Finance Minister Joe Oliver called it a “private decision” and said that the possibility of low rates triggering a housing bubble was “hypothetical.” The Bank of Canada has warned that Canadians need to prepare themselves for a time when interest rates head north, increasing the carrying costs of holding a mortgage. BMO has the lowest advertised five-year, fixed rate of the major banks, but some small lenders are offering rates as low as 2.74 per cent, according to the website Ratehub.ca.

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