The Bank of Montreal is slashing its five-year fixed-rate mortgage to levels that caused former finance minister Jim Flaherty to express concerns last year. The bank says it will offer a five-year rate of 2.99 per cent, down from 3.49 per cent.
BMO is the first big bank to lower its key five-year rate below the three per cent threshold. In March 2013, BMO dropped its mortgage rate below that level, causing Flaherty to publicly address the bank, saying that he disapproved of the rate and discouraged other big banks from following its lead.
At the time, he said he believed in "responsible lending," and that he was concerned such low rates would work against his attempts to slow the momentum in the housing market.
Flaherty resigned from his role as finance minister in a surprise announcement last week. He was replaced by Joe Oliver.
"Our government has taken action in the past to reduce consumer indebtedness and the government's exposure to the housing market," Oliver said in an emailed statement. "I will continue to monitor the market closely."
BMO has slashed its five-year fixed-rate mortgage to below three per cent, levels that former finance minister Jim Flaherty had raised concerns about last year. (CBC)
BMO spokesman Paul Deegan in an emailed statement: "This rate change is driven solely by the fact that bond yields have fallen, and we are in what has traditionally been the busiest season for buying a home."
Longer-term mortgage rates tend to follow bond yields and those yields have been falling recently. The Bank of Canada benchmark five-year bond yield, for instance, was at 1.69 per cent on Wednesday. Just three months ago, the yield was 1.97 per cent.
Other Canadian banks have also recently cut their rates. Toronto-Dominion Bank reduced its four-year fixed-rate mortgage to 2.97 per cent earlier this month, while Scotiabank lowered its rates across the board while issuing a four-year special rate at 2.94 per cent.
The move by BMO puts it in line with rates from Meridian Credit Union, which lowered its five-year fixed-rate mortgage to 2.99 per cent in February. Meridian is the largest credit union in Ontario.
Some mortgage brokers are also advertising five-year fixed rates below three per cent from other lenders.
These cuts to rates come on the heels of reports from RBC and the Conference Board of Canada saying that mortgage rates are set to rise this year.
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