BMO lowers 5-year mortgage rate, sets stage for rate war
Published Thursday, March 8, 2012 7:01PM EST
BMO Bank of Montreal announced Thursday it's lowering two key mortgage rates, setting off what could be yet another mortgage war with other lenders.
Canada's fourth-largest bank lowered its five-year, fixed mortgage rate to 2.99 per cent Thursday. That represents a drop of a half a percentage point.
It's also introducing a new 10-year mortgage that comes with an introductory fixed rate of 3.99 per cent. That mortgage will be available starting Sunday. Both the five-year and 10-year offers apply to 25-year amortizations.
The new rates will be available only until March 28. BMO is urging home buyers to get pre-approved financing now to take advantage of the special rates.
With BMO throwing down the lower-rate gauntlet, it is expected that other lenders will soon roll out similar offers. When BMO last offered 2.99 per cent rate back in January, TD Bank and Royal Bank quickly followed up with their own similar deals.
The new rates come a day after two housing reports were released that said that prices in Canada's housing market are shifting in favour of home buyers.
Scotiabank senior economist and real estate specialist Adrienne Warren said the market is cooling but still remains in better shape than many international markets.
Warren did warn that if job growth slows significantly, or household debt spikes, the housing market could suffer.
In a separate report, the RBC Housing Trends and Affordability Report found that home prices eased off and income increased at the end of 2011 -- two forces that combined to give a break to the Canadian housing market.
On Thursday, Statistics Canada said the national average price of new houses rose 0.1 per cent in January from the previous month. It said higher prices in Calgary and Vancouver were the main contributors to the increase, offsetting decreases in Victoria and St. John's, N.L.
Benjamin Tal, deputy chief economist with CIBC World Markets, told CTV's National Affairs Wednesday that the Canadian housing market is "overshooting," but won't be crashing anytime soon because the Bank of Canada is unlikely to increase interest rates and risk hurting the economy.
On Thursday, the Bank of Canada announced that it's holding held its overnight rate steady, at one per cent.