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People Open To Shorter Amortizations: BMO

BMOIt seems Canadians want to be mortgage-free as fast as they can.

That probably doesn’t surprise many people, but it’s BMO's latest finding nonetheless.  

In a release today, BMO says 69% of people it surveyed are “open to the idea of a shorter amortization.”

BMO adds: “…those looking to get into the housing market now or in the near future should be considering financially responsible options, such as a 25-year amortization.”

“Canadians should be realistic in measuring what they are able to afford,” BMO says.

We couldn’t agree more with that.

BMO’s solution:  Offer a great 5-year fixed rate of 3.54% to people who do the right thing and get a 25-year maximum amortization.

3.54% is a bargain if you don’t mind BMO’s restrictions, and it’s good to see BMO pushing borrower responsibility.

On the other hand, BMO doesn’t believe in the cause enough to eliminate 35-year amortizations altogether (thank goodness they don’t, for reasons noted last week). Nor does it offer the “25-year discount” on its 1, 2, 3, 4, 6, 7 and 10-year terms. Nor does it seem to discourage interest-only payments on its highly profitable ReadiLine product.

Moreover, we’ve heard BMO mortgage specialists say they can get the very same 3.54% rate for a BMO mortgage with a 35-year amortization (and without the other handcuffs of BMO’s Low Rate mortgage).

With this and Ed Clark’s seemingly contradictory position about amortizations last week, we’re inclined to wonder:  Is “borrower responsibility” mostly a PR buzz phrase with the banks, or is it a real movement?

It’s a fair question.

Sidebar: Just to clarify the point about Ed Clark (TD’s CEO), the Financial Post quoted him as speaking out against 35-year amortizations last week. Clark suggested 35-year mortgages discourage saving. Some labelled this a contradiction because of TD’s recent changeover to collateral charges (which promote re-borrowing to tap more of one’s home equity).

Robert McLister, CMT