Ultra-low mortgage rates have returned, although the offers self-destruct in a few weeks.
BMO reintroduced its groundbreaking 2.99 per cent 5-year fixed mortgage. It also added a new 10-year fixed mortgage at 3.99 per cent, the lowest 10-year rate it has ever offered. Both are no-frills, closed mortgages that restrict pre-payment or refinancing options:
- 10 per cent maximum on lump sum pre-payments
- 10 per cent payment increase per year
- no refinancing unless property is sold or mortgage is renewed at BMO
- 25-year amortization (as opposed to the usual 30)
These restrictions mean this mortgage is not for everyone. Most 5-year fixed mortgages are refinanced or added to before their time's up.
Both low-rate mortgages will be available until March 28.
When BMO first offered its 2.99 mortgage in January, other lenders quickly jumped in with similar rates, and some with fewer restrictions. The same thing is happening this time.
RBC Royal Bank, TD Canada Trust, CIBC, Street Capital and First National all announced a 4-year first mortgage at 2.99 per cent, but with all bells and whistles. Coast Capital offers a 5-year, 2.98 per cent mortgage with all the extras. So far, none have matched BMO's 10-year rate.
Last time this happened BMO scored big on the publicity. This time RBC is ready, countering with full-page newspaper ads asking, "What good is a low-rate mortgage without the frills? ...Switch to RBC Royal Bank and get a 2.99 per cent fixed rate mortgage with all the frills."
More lenders could jump into the price war, so call a mortgage broker or check our Mortgage Information page to find current mortgage rates and calculate payment.
Bank of Canada Rates Don't Budge
The worm-burner mortgage rates coincided with the Bank of Canada's latest announcement. For the nineteenth month in a row, the Bank of Canada has held its key interest rate at 1 per cent.
However, the announcement came with a slight change of tone. The Bank now sees encouraging signs of global economic stablization and even recovery, as long as oil prices don't climb too high.
The report said, "Recent developments suggest that the outlook for the Canadian economy is marginally improved from the January Monetary Policy Report. Although the economy will likely grow faster than forecast in the first quarter due to temporary factors, underlying economic momentum remains around trend, balancing domestic strength and external weakness."
It anticipated total inflation at around 2 per cent, "reflecting the combination of modest growth of labour compensation, an economy operating around its potential over time, and well-anchored inflation expectations."
One large issue has not improved and that's Canadians' household debt. The Bank of Canada sees this as "the biggest domestic risk."
The bank rate is not expected to rise before mid-2013 as long as the inflation rate stays on the 2 per cent target, but some analysts see today's announcement as a hint that if improvement continues the Bank may increase the rate before that.
If that happens, anyone who's locked in to a four- or five-year mortgage at 2.99 per cent will feel pretty smart.
