BMO brings back 2.99% five-year mortgage

The Bank of Montreal has fired another shot across the bow of its housing market rivals by renewing its record-low 2.99 per cent rate on five-year mortgages. The bank also said Wednesday it will offer a rate of 3.99 per cent on 10-year mortgages. Both products come with a 25year amortization period. The offers takes effect Sunday, and will be available for three weeks, ending March 28, said Frank Techar, head of Canadian personal and commercial banking at the Bank of Montreal. The special offers – a boon to heavily indebted home buyers – come amid worries that Canada’s real estate market is cooling, and that prices in big cities such as Toronto and Vancouver may be headed for a decline. The deals also highlight increasing competitiveness among Canada’s big banks. The 25-year amortization periods, which would leave some borrowers unable to qualify, are “good for Canadians and good for the stability of the Canadian housing market,” Techar said. “We want to minimize interest rate-risk for our customers and help them understand the benefits of paying their mortgage faster.”

The maximum amortization period on a mortgage is typically 30 years.

The products carry some restrictions. Customers can pre-pay and make lump sum payments as long as the total doesn’t exceed 10 per cent of the principal amount owed. Most mortgages let you make monthly and lump sum payments of as much as 20 per cent.

As well, you cannot refinance or switch your mortgage to another lender for the length of the term.

“We’re trying to reinforce the fact we want customers to have the benefit of the low rate but we also are catering to customers that want to live in their house and repay their mortgage as fast as possible,” Techar said.

Bank of Montreal was the first to offer the 2.99 per cent rate in January as a time-limited offer.

It was later matched by TorontoDominion Bank and Royal Bank of Canada, though both banks ended the promotion early, citing changing conditions in the bond market.