BMO’s 2.99% 5-Year Fixed Sets Bank Record

Rate-dropLater today, BMO is reportedly announcing the lowest advertised 5-year fixed rate ever for a Canadian bank.

It’s a 2-week promotion at 2.99%. Official announcement to follow.

This previously unthinkable rate has been eclipsed only by a handful of other mortgage companies. Those lenders (AGF Trust and Lendwise) made sub-3% rates available to brokers for brief spurts in 2011.

For those considering the Bank of Montreal (BMO) Low-Rate mortgage, be cognizant of its restrictions. Once you close, you cannot discharge this mortgage for five years unless due to a bona fide sale of the property.

Although, BMO does allow you to renew early, refinance to another BMO mortgage, or transfer your mortgage to a new property.

Here’s our original story from March 2010 with all the pros and cons: BMO Low-Rate Mortgage.

Update:  Here is BMO’s official 2.99% 5-year fixed announcement.

  1. Nice job breaking this news Rob. More and more this is becoming the “go to” site and the leader in mortgage news and analysis.

  2. Thanks Rob
    I currently have a prime -0.75 variable for 5 years with BMO, only 4 months in. Barring any additional fees for locking in at this rate, would you suggest the switch to the Fixed? Or does this move make it look like low prime is here to stay and I should stick it out with the Variable.

  3. Tim,
    With a .75% difference between your rate and the current fixed rates, I would stay where you are. There is a very good chance that your variable rate will outperform this fixed rate over 5 years. This fixed term has a lot less flexibility as well.
    2.99% is insane, though…

  4. I don’t see what’s so insane about this offer. BMO’s latest promo aside, the lowest 5-year fixed available without this offer right now is around 3.19%. So it’s a matter of only 20bp. What concerns me are the myriad of restrictions that are attached to the offer. The homeowner is essentially shackled to BMO for 5 years. You can’t even discharge this mortgage unless an arm’s length sale of the property takes place or you refinance into another BMO product. Suppose you have to refinance two years down the road, would BMO put in writing that you’ll receive their best rate at the time? With lenders like ING, MCAP, LBC I know I’m getting best rates. Can the same be said for BMO?
    Not saying this offer doesn’t have its merits because the pricing is quite attractive but when you look at all the strings that are attached, and considering that it is a time-limited offer, I think it’s more about breaking the psychological 3% level (well, by .01%) rather than offering anything of significant value. Low rates are great but what people need are strategies. Unfortunately there’s not much strategy that can be done with such a restrictive mortgage. It may indeed work for some but clearly not everyone. Give me an ING unMortgage at 3% — now that’s significant news. But we’re not there yet!

  5. How does this compare to the BMO eco mortgage which according to the BMO website is also available at 2.99% but appears to have fewer restrictions ie 30 year ammortization, fewer discharge restrictions, 20/20 prepayment.
    I know you need an energy star house and appliances but for most new homes this seems like a fit.

  6. If you compare what you are missing out on it really doesn’t add up to much…$15.52 per month. What you have to look at closely is that you are locked into this mortgage for 5 years unless you sell the property. Since most people refinance within 3 years this really isn’t the best deal.

  7. $15.51 per month for what? Taking a reasonable example of a 5yr fixed 300k mortgage, 25yr amort. At 2.99% vs. 3.29%, that cup of coffee a day difference adds up to $4,250 over the 5yr commitment.
    Who is going to refinance a 2.99% mortgage? The only people I can think of are those on the forever ever ever plan and who use their home as an ATM.
    This is an excellent rate for a standard mortgage product without paying a rate premium for features they probably won’t be utilizing. Can’t wait to see what other F.I.’s offer in response to this.

  8. Agreed, but a significant number of people are that price/payment sensitive and this product plays to them. That 20-30bps makes all the difference in the world to the kind of people who drive across town to save 2 cent/L on their gas fill up.

  9. RBC has an internal memo stating they will match this rate as long as the client adheres to the same restrictions. Also, making the client go from a standard 30 year amortization to 25 years does start to weed out quite a few people… you’d be surprised how many people can’t qualify for these great rates when the amortization drops 5 years.

  10. I think we all knew RBC would match. It makes you wonder how this BMO & RBC approach compares with CIBC’s “won’t compete on rate but enhance the client experience” concept.

  11. Actually you are mis-informed. The only restrictions on the RBC offer are:
    1.) Max 25 Year Amort
    2.) Mortgage is not eligible for the RBC Homeline
    3.) Maximum 90 day Rate Commitment
    A client would be able to refi it or pay it out with having to sell, and are not tied to RBC.
    For an insider, you would think you would have your facts straight.

  12. You’re reading the wrong portion of the website. The eco mortgage rate is 3.69% as presented in larger font in the middle of the page.
    the 2.99% is off to the right side of the page, in smaller font, referring to their lowest possible 5 Year Low Rate Mortgage (Closed) which is the product being referred to in this article. Two different products.

  13. RBC just matched TD’s 2.99% 4 year fixed, available until February 29th, 2012, no restrictions… fund by April 30th, 2012.

  14. You do know that 2 other lenders in addition to RBC, TD, and BMO are offering this rate, right? At least BMO, even with all the limitations of the offer, are offering this as a published rate. How many people are the banks calling up who are paying “special offer” rates to let them know about this magnificent special? Probably none.

  15. This BMO mortgage could be a trap for some, if they are being qualified for the loan at this low rate. What happens at renewal 5 years from now when the rate is 6.0%?

  16. BMO rocks….i hope the ceo’s from the other banks are paying attention…that is if they bother looking at the net from their resorts in palm springs….its almost tempting to jump from my variable which is lower but of course not guaranteed for five years….rite on bmo…..

  17. BMO rocks? ummm ya right up to getting out of the mortgage. I had to pay a small fortune (18,000) in penalties to get out of this ROCKIN BMO mortgage. Posted rates my friend…posted rates.

  18. 18k in penalties? wow….i got out of my fixed a whiles back and paid about 4k in penalties and felt sick but i’m at 2.5 on the variable and looks like b of c rate not going anywhere…

  19. So yu think that only the other “big 5” bank CEO’s have resorts in Palm Springs and BMO’s doesn’t? C’mon, if you are goingto paint some with a brush, then paint them all. Oh yeah, IT’S A LIMITED TIME OFFER!!! Other banks are offerieng this as well! There is no distinguishing features other than being one of the most restrictive promo mortgage product to come along for quite some time! BMO Rocks, until someone tries to manage their mortgage and realizes BMO has them trapped!! BMO Rocks! BMO Rocks!…

  20. When did it surprise you that your penalty would be $18,000??? For those of us who plan a few years in advance this mortgage is great. For those of you who change strategies ever 2 or 3 years, despite having lined up a 5 year term, well you pay the price.

    Vince Gaetano: The product is restrictive as follows: fully closed and no portability, only a 10% prepayment and only 10% lump sums on anniversary date and it’s a collateral charge – non transferable
    Is this true???
    I though you could port it, prepay multiple times on any date and that is was registered as a standard charge.
    Can someone please clarify?

  22. Vince is wrong.
    On BMO’s website it says
    ” you can make a lump-sum prepayment (in $100 increments) ”
    ” Flexibility to….transfer your mortgage to a new property ”
    I called BMO to confirm these things. They also told me BMO’s mortgage is not a collateral charge.

  23. funny thing is, i’ve been selling 2.99% 4 year mortgages for 4 months now with amazing terms … so really all they’ve done is added a year with bad terms. this rate is truly only good for the first term of your mortgage where you likely wouldn’t make a move anyway. Plus, we now have 3.14% 5 year with grest terms anyway. Love this business !!!

  24. Great. I will borrow to invest in excellent blue chip canadian stocks with constant minimum 5 % dividend payments.
    In addition the interest on the loan will be tax deductible.
    If after 5 years the renewal goes up to 6 % I can sell my shares with an additional capital gain profit and pay off the mortgage and keep the profit.

  25. I like the idea but I would get a 10 year mortgage for 3.79%. Who knows. We may never get these low borrowing costs again. Borrowing at a tax deductible 3.79% to earn a 6% return isn’t too bad.

  26. The “Low-rate” 5-year fixed offer on the BMO web site
    January 25: 2.99% until January 25
    January 26: 2.99%, can be withdrawn any time
    January 27: 3.49%
    Is it the end of the great sub 3% rate?
    Other big banks (I checked TD, RBC, and Scotia) still hold their 2.99% on 4-year fixed as of today. We’ll see…
    RBC and TD offer the special rate till February 29. RBC, however, says “Offer may be withdrawn, or amended without notice at any time.”

  27. Good question. 5YR GCAN bonds are fairly stable at the moment so there should not be any rate pressure at this moment.
    As for aggresive fixed rates like the 2.99% BMO special, in February, F.I.`s traditionally turn their attention to the RRSP season and since many of the staff also sell RRSP`s, that is usually their main focus. Once February is out of the way, look for maybe some agressive discounting starting up again in March, in time for the spring house buying season.

  28. If they are that tight with the current interest rate, they really should not be buying a house. These rate can only go up from here.

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