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Flaherty’s Out. BMO’s Back at 2.99%

BMO apparently no longer dreads “the phone call.”


That, of course, refers to the infamous calls from the Department of Finance discouraging banks from pricing below 3 per cent. Former Minister of Finance Jim Flaherty seemingly took pride in those calls, publicizing them in the media.

But the Flaherty era is now over and, coincidence or not, BMO is back in the 2.99% business.

BMO’s current 2.99% special is far from the lowest 5-year fixed rate in the market. Brokers and non-bank lenders have been sub-3% for a while now.

Moreover, BMO’s rate only (officially) applies to its restrictive “Low Rate” mortgage. That product’s limitations include a fully-closed term (barring bona fide sale or refinance with BMO), a non-discounted penalty calculation, lower pre-payment privileges (10% annually), lower optional payment increases (10% annually), no optional HELOC (ReadiLine), no BMO Cash Account (a great feature), no Skip-a-payment and a 25-year maximum amortization.

That said, you can bet your deed that BMO and/or other banks will come very close to 2.99%, if not match it in some cases, for a full-featured mortgage.

The 2.99% rate has become a psychological benchmark in mortgage pricing. It’s the number that many remember most when evaluating the rate they’ve negotiated.

BMOBMO has been incredibly successful at using this number to its advantage, getting media play at every opportunity (latest example).

Its spread on this mortgage is currently 130 basis points over the 5-year government bond. Until recently, 150+ bps has been more normal for 5-year money. That suggests BMO and the other banks are stepping up their games in the key spring buying season.

Rob McLister, CMT (email)