BMO Drops 5-Year “Low Frills” Rate To 3.59%

BMO continues to aggressively execute its new discount mortgage strategy.

It just sliced its 5-year fixed "low frills” rate from 3.79% to 3.59%.

It’s the lowest publicly-advertised 5-year fixed rate we can remember from a big bank.

BMO says this deal “saves homeowners over $60,000 in interest costs compared to leading competitors’ five-year special fixed rate at 3.89 per cent and 35-year amortization.” This estimate is based on the total projected interest costs of a $200,000 3.59% and 3.89% mortgage, over 25 and 35 years respectively. (The comparison isn’t wholly accurate because rates will change at renewal in 60 months.)

BMO has a great rate, no doubt.  But if you’re entertaining this offer, remember three things:

1. The fine print. Barring sale, you can’t break BMO’s mortgage and go elsewhere. Most people do break their 5-year terms early. In addition, pre-payments are capped at 10% a year. See: BMO 5-year mortgage special
2. Various competitors will match or beat 3.59% on a 5-year. Shop around!
3. Depending on your rate outlook and risk tolerance, a 5-year term, even at 3.59%, is not necessarily the lowest cost option for the next five years. Talk to your mortgage planner and have him/her line up all the alternatives for you.