The clear sign of a mortgage rate war is when Bank of Montreal (BMO) starts advertising a 2.99% 5 year fixed mortgage rate. Although current bond yields don’t support such a low mortgage rate we are entering the critical spring season that can make or break a bank’s annual lending target.
The tightened mortgage rules have done their job and pushed many potential buyers out of the market and scared even more from buying or upsizing their next home. From the banks perspective however, they have just as much money to lend and want to hit their earnings targets. Lots of supply and not so much demand. The simple economic principle of supply and demand cannot be ignored and prices are dropping.
A low mortgage rate is the number one factor to consider in shopping for your next mortgage, but make sure you don’t make it the only factor. As always, its buyer beware. Bank of Montreal is always the first one out of the gate with the 2.99% offer and the only one to put it in writing. It’s not because of their generosity, but because it’s a no frills mortgage that cannot be paid out – no matter how much of a penalty you’d be willing to pay. The other big banks can’t match the BMO offer by publishing a 2.99% mortgage rate because they don’t have such a restrictive product.
It’s a borrowers market out there making this spring a great time to renegotiate your next mortgage. Just be sure to check the fine print and ask the tough questions. If you aren’t sure what mortgage is best for you, be sure to consult with an accredited mortgage broker.