Remember back in March when the Big Six banks dropped their rates to such ridiculous lows that they were practically giving mortgages away? One by one, each bank dropped their rates, taking advantage of low borrowing costs and trying to entice customers into buying their product. Those deals only lasted a couple of weeks until May, when they dropped their rates and did it all over again. Each of those times, it was BMO that started the mortgage wars, and now they just may have done it again.
This week, BMO announced that they had another offer on special. No, it’s not the 2.99% that they were offering before, but it’s pretty close. This deal is being offered at 3.09% for a five-year fixed mortgage. But before you go running off to your mortgage broker asking them to hook you up, you should know about the restrictions that come with this mortgage.
The biggest one is that home refinancing is not possible until the mortgage is up for renewal. That means that should you lose your job, need to add (or subtract) months from your mortgage, or move, you won’t be able to do anything about your mortgage without facing some very serious penalties. BMO’s hope is to drive customers through their door and keep them there. And it seems to be working. Not only are they getting those customers, but they’re high-quality customers, too, according to BMO President and CEO, Bill Downe.
“We’ve been at the forefront of a significant change in the structure of the Canadian residential mortgage market. With the success of this mortgage we have seen above average credit quality and importantly, the proportion of mortgages approved that are ultimately closed have also risen. We’ve attracted new customers and established a foundation for productive long-term relationships.”
BMO also went to one step further, saying that not only have they gained better quality customers, but they’ve also gained far more of them. And more than their competitors even. That might not be surprising for some of the big banks, especially considering that CIBC’s mortgage growth over the second quarter was virtually nil. But what about the others? Especially RBC, the biggest mortgage lender in the country. It’s hard to say.
Frank Techar, BMO’s President and CEO of Personal and Commercial Banking Canada chimed in about the new mortgage product, saying,
“We benefited because we now have customers who are going to be with us for a while and we saw a significant increase in new customers coming to BMO through the campaign as well. So, putting a fine point on it, our market share went up 21 basis points in Q3, so we did more business than some of competitors. It’s obviously an important product to us.”
But how important will it be to their competitors? Important enough to get in on the war and drop their rates, too? Only time will tell.
