Bank of Montreal is bringing back its controversial 2.99 per cent five-year fixed-rate mortgages.
BMO sparked a mortgage price war among the banks early last year when it first introduced the rate, one that angered Finance Minister Jim Flaherty, who has been worrying that Canadians are taking on too much mortgage debt. The bank stopped offering the rate later in 2012.
The bank is now cutting the rate on five-year fixed mortgages from 3.09 per cent to 2.99 per cent, effective immediately.
It said the rate will only be offered on mortgages with a length of 25 years or less. Mr. Flaherty tightened the mortgage rules in July and those changes included saying the government would only backstop insurance on mortgages of 25 years or less, down from 30 years. It was one of numerous changes he has made in an effort to make it slightly harder for consumers to obtain mortgages, as he’s sought to cool the growth of debt levels and house prices.
When the banks engaged in a mortgage price war early last year, Mr. Flaherty urged caution.
“You should be cautious about your lending practices, because this is the type of practice that led to a mortgage crisis in the United States several years ago,” he has said he told them. “So my expectation is that you will not compete to the bottom on interest rates, which is the direction they were going.”
In a press release Ernie Johannson, senior vice-president of personal banking in Canada for BMO, said “BMO’s efforts to encourage Canadians to pay down debt and build equity in their homes have been aligned with Minister Flaherty’s timely and prudent actions to encourage moderation in the housing market.”