BMO caves in to Federal govt pressure and raises mortgage rate.

It was bound to happen.  BMO announced their so-called ‘low-rate’ (NO FRILLS) 5 yr fixed rate mortgage would be increasing to 3.09% from 2.99%.   This comes shortly after the Federal Minister of Finance, Jim Flaherty, said that he called BMO and asked them to pull their 2.99% ads.   Last week, the Minister’s office asked Manulife Bank to withdraw their recent ad promoting a similar low rate.  

While, 2.99% isn’t the best rate today, it was the lowest advertised rate from the BIG SIX BANKs.    It was somewhat symbolic.    Of course, Mortgage Brokers have access to even lower rates through the wholesale mortgage market, but these lenders don’t have the deep advertising pockets that BMO or the other BIG SIX BANKs have.   So the publicity surrounding this rate and the increase will get much more air-time.   You can actually find full-featured 5 year mortgages at 2.89% today, through a good mortgage broker (a word of warning.. I’ve seen lower rates offered, and I have access to these products… but these products are not full-featured and come with some limitations that make them less attractive… just be careful when choosing your mortgage and your mortgage broker)…

WE SHOULD TAKE NOTICE AND PAY ATTENTION

The BMO 2.99% rate was symbolic.. and the increase to 3.09% should not be ignored.. Our Federal Govt contacted BMO and voiced their displeasure with the 2.99% offer… This action is unprecedented.  Actually, it’s quite shocking, to say the least…  To have a the govt contact a private corporation and ask them (probably more like tell them) to change how they price their business, is almost unthinkable.    We need to pay attention to this.  This is a strong signal that our Federal govt is determined to increase mortgage rates….

The govt has a lot of power.  And with the Bank of Canada Governor, Mark Carney, leaving on July 1st, it will be interesting to see what stance his replacement will take… will he or she stand on guard for thee?? (Canada Day.. strange choice for the last day on the job…we’ll see if that is a good day or bad day for Canadians).   My guess is that Carney’s replacement will be someone who is more on side with the Federal govt’s program of raising rates soon…

For consumers, this will probably mean higher interest rates…. When will they go up?  We don’t really know.. but they will increase at the first available opportunity…you can count on that.   Remember, today’s interest rates are considered emergency rates.. These low rates are not normal borrowing rates…  Keep this in mind when choosing your next mortgage term…

My best advice is to consult with a Mortgage Broker.. someone who is independent, doesn’t work for any one Lender or Bank and can give unbiased advice…

Looking out for your best interest.

As always, feel free to contact me with your questions and comments.

Steve Garganis 416 224 0114 steve@mortgagenow.ca