New mortgage rate war looms as BMO cuts 5-year below 3%

THINK OUTSIDE THE BOX:  Be sure to ask questions and check the ‘fine print’ of any mortgage offer to ensure the product meets your needs.  For example:   Is there a due on sale clause with this offer?  What are the pre payments?  What if you want to blend and increase in a couple years – what rate will be used?  How are penalties calculated if something comes up and clients need to pay off the mortgage?  What rates will be offered at renewal?

Maybe it’s a coincidence that former Finance Minister Jim Flaherty is gone but Bank of Montreal signaled it is about to kick off another round of mortgage rate wars.
Pay that mortgage off? Why would you bother, especially if that money could be invested elsewhere at a higher rate?
The bank, which drew the wrath of Mr. Flaherty for starting a battle which saw rates drop to record lows, is ready to hit the marketplace again with its 2.99% offer for a closed five-year fixed rate mortgage.
BMO said it will make the move at midnight to lower the five-year rate from 3.49% to 2.99%. The 50 basis point cut would be the lowest among the big banks although discounters are offering even slightly lower rates.
Our mortgage offer is the responsible choice as it can help Canadians become mortgage-free faster
“With BMO, homebuyers can lock-in below 3% for a full five years of protection against rising rates. With a maximum amortization of 25 years, our mortgage offer is the responsible choice as it can help Canadians become mortgage-free faster,” said Martin Nel, vice-president of personal products, with BMO Bank of Montreal, in a release.
Mr. Flaherty, took great pains to slow the housing market, and tightened mortgage rules on four occasions. One of the most noted changes was shrinking amortization lengths from 40 years to 25 years for mortgages covered by government-backed mortgage default insurance.
Bank of Montreal started last year’s battle with its 2.99% offer and other banks started matching with similar deals. Manulife Financial Corp. even took its five-year product down to 2.89% before being stopped in its tracks.
“After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate,” a spokesman for Manulife said at the time.
But Mr. Flaherty is long gone from finance and it remains to be seen how tough his replacement Joe Oliver will be on the housing sector.
“This is driven by the fact that bond yields have fallen and we are in what has traditionally been the busiest season for buying a home,” said Paul Deegan vice-president, government and public relations with BMO Financial Group about whether the move was driven by the fact there was a new finance minister.
At the present discount, BMO is even getting close to what some of the best discounters are offering. The site says the best five-year rate is now 2.94% among discounters.

Garry Marr | March 26, 2014 | Last Updated: Mar 26 8:40 PM ET
More from Garry Marr | @DustyWallet

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