BMO lowered it’s 5-year variable rate to prime (2.25%) today.
It’s the first of the Big 5 banks to offer variables at prime in about a year.
BMO’s press release calls it the “lowest rate in more than 30 years.” This apparently refers only to BMO’s own variable rates, since prime and “prime minus” are already being advertised by brokers.
Terminology: The “prime-BA spread” is simply prime rate minus the 30-day bankers’ acceptance yield. In very raw terms, it represents gross lender margins on variable-rate mortgages. From this spread, lenders have to pay liquidity/risk premiums (when raising lending capital in the credit markets), customer acquisition costs, overhead, salaries, etc. The remainder is profit.
The prime – BA spread is currently at 1.95, whereas it averaged ~1.70% before the credit market went haywire last October.