Remember back in January when many of the major Canadian banks slashed the rates on their mortgages and offered fantastic, short-term deals? If you remember that, then you can probably also recall how just a couple of weeks later, most of those same banks pulled those offerings from the table, angering Canadian consumers. At the end of it all, many bank executives in Canada had said that the low rates being offered were unheard of, and that we wouldn’t see them again.
They were wrong.
BMO, the first to offer those mortgages back in January, is the first to offer them again. And this time, they’re low enough to set a record. The offer BMO is making is the same one they made several weeks ago – a five-year fixed mortgage at 2.99%. While that’s enough to get people talking, it’s the record-breaking 10-year deal at just 3.99% that’s really got everyone talking. The move is undoubtedly to help BMO get back some of the profits they lost in the first quarter of the year; just last week they reported those earnings were down by 6.7%. But Frank Techar, President and Chief Executive Officer at BMO said that, “The reason we are back in the marketplace is because of the positive reaction we had back in January.”
But it’s also one that has other banks worried about the moves they’ll now be pressured to make. When BMO put that same kind of heat on in January, RBC’s head of retail banking, David McKay, called BMO a “market attacker.” It didn’t stop RBC, or any other major banks, making the same kinds of deals though, as many came out with remarkably low Toronto mortgage offerings. But, Mr. Techar wants to be very clear about the fact that customers will still get a better deal going with them. “To be really clear,” he said along with the announcement of the discounted mortgages, “None of them really matched us back in January. They matched us on the rate, but on a four-year term. We offered one more year of protection against rising rates.”
The move of course, doesn’t just help banks reclaim profits and make some more money; they also provide customers with a way to get a really great deal on a mortgage at a time when rates are really low. But, even though locking into a low-rate mortgage might seem like a good idea, a mortgage broker based out of Vancouver, Dustan Woodhouse, tells people to “look at their life in three-year increments” and determine whether the family is going to grow or shrink, if the income is going to get bigger or smaller, and whether a marriage or divorce is in the cards for somewhere down the line. Fixed-rate mortgages, says Mr. Woodhouse, shouldn’t be entered into unless a homeowner knows they’re going to be in their home for 10 years or more.
But the bottom line is really, not to get too caught up in the banks’ mortgage wars. If now is the right time for you to get a mortgage, look into BMO’s newest offering. Or, wait a few days to look into what the competitors are offering to match it. But don’t go looking for a mortgage right now just because the banks are competing against each other; and don’t take out a fixed-rate mortgage just because they have super low rates attached to them right now.
At the end of every day, you’ve got to remember to do what’s right for you. And that just because the banks are going crazy, it doesn’t mean that you have to join them.
