TORONTO—The Bank of Montreal has slashed its five-year fixed mortgage rate to 2.99 percent, a level that had previously raised concerns that it may lead to an overheated housing market.
The bank 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 Sept. 10.
Previously, BMO’s five-year, fixed rate had been 3.29 percent.
The bank raised concerns from Ottawa when it offered the 2.99 percent 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.
In March this year, BMO again cut its five-year, fixed rate to 2.99 percent, but raised it to 3.29 percent 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 percent, according to the website Ratehub.ca.
BMO Offers 2.99% 5-Year Fixed-Rate Mortgage Again
The Bank of Montreal has slashed its five-year fixed mortgage rate to 2.99 percent, a level that had previously raised concerns that it may lead to an overheated housing market.
9/10/2014
Updated: 9/10/2014
