The recent announcement that BMO has lowered its 5-year fixed rate from 3.09% to 2.99% has caused a flurry of speculation from market analysts and warnings from the federal government.
Lower rates could interest more buyers this spring, and might encourage some buyers to take out larger mortgages than they otherwise would. So, despite the government’s rule changes this past year, and despite its urgings to lenders, growing market share triumphs.
According to Canaccord Genuity analyst Mario Mendonca, BMO has been seeking to bolster its mortgage sales since it stopped using mortgage brokers about four years ago. It still has the lowest mortgage market share among the five largest banks.
The interesting part of all this is that some lenders’ fixed rates are actually lower than what BMO has advertised – the difference is that BMO actually announced it. For the past month or so mortgage brokers have had access to rates trending down from 3.04% to 2.89% for 5-year fixed to 2.69% for 3-year rates.
Mortgage consumers should also look at BMO’s product and read the fine lines because there are restrictions, which, of course, are not advertised. They include the following:
- You only get 10%/10% prepayment privileges. Many other lenders give homeowners the option to increase their monthly payments by 20% or more each year, as well as make lump-sum payments on the original mortgage in that same percentage range.
- You can’t skip a payment or access a mortgage cash account. Skipping a payment, should you need to, is not an option.
- You can’t transfer your mortgage to another lender until your term is up. Throughout your 5-year term, the only way you can refinance, transfer or payoff the balance of your mortgage, is if you stay with BMO while doing so, or sell your home. It’s not uncommon for homeowners to break their mortgages early.
Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta).