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A ‘for sale’ sign is seen in Toronto’s east end.

Deborah Baic/The Globe and Mail

The Globe's new Real Estate Beat offers news and analysis on the Canadian housing market from real estate reporter, Tara Perkins, and others. Read more on The Globe's housing page and follow Tara on Twitter @TaraPerkins.

Bank of Nova Scotia is the latest lender to push the envelope on mortgage rates, offering a five-year fixed rate of 2.97 per cent.

That's the lowest five-year fixed rate among the big banks, and comes in slightly below the 2.99 per cent rate that Bank of Montreal has sparked controversy with in recent years (Bank of Montreal's current five-year fixed rate is 3.29 per cent).

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When Bank of Montreal and Manulife Bank dropped their five-year fixed rates below 3 per cent in the spring of 2013, they raised the ire of then-finance minister Jim Flaherty, who was trying to curb growing consumer debt levels. But current Finance Minister Joe Oliver has signalled that he wants to be less involved in the mortgage market than his predecessor was.

There are lower rates in the market. Earlier this month Investors Group had a 1.99 per cent promotion, but that was on three-year variable-rate mortgages. Five-year fixed rates are important because the government requires consumers who are taking out an insured mortgage of less than five years to pass a test that shows they could afford a five-year fixed-rate mortgage. So it's the five-year fixed rates that could, in theory, cause more concern in Ottawa about consumer debt levels.

David Stafford, Scotiabank's managing director of real estate secured lending, makes a case for why he thinks Ottawa should not be worried: he says the bank is telling consumers to use the low rates that are available in the market today to pay down their mortgage faster, rather than taking advantage of the low rates to buy a more expensive house than they otherwise would.

"Consumers view rate as a proxy for cost," he says. "But the actual cost of the mortgage is the dollars that you spend in interest. There are three things that drive that: how much you borrow, at what rate, for how long. And the most expensive part of the mortgage right now is time, not the rate… "If you were to make a payment on your mortgage as if rates were 4 or 4.5 per cent, then that 3 per cent rate goes to work for you."

Banks normally stoke competition in the mortgage market towards the start of the all-important spring home selling season, but Scotiabank's rate promotion comes relatively late. That's a sign that the traditional spring selling season was delayed, in large part by bad weather.

"The mortgage market started late this year, it was a late spring," Mr. Stafford says.

Scotiabank's head of Canadian banking, Anatol von Hahn, told analysts that the mortgage market is not growing the way it has in previous years, and noted that mortgages are the largest item on the big banks' balance sheets.

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"We've had a bit of a slower start to the mortgage season," Royal Bank of Canada president Dave McKay told analysts last week.

Mr. Stafford says he remains optimistic that business is picking up, and says there have been steady increases in mortgage volumes week-over-week.

"There's going to be a burst of activity," he says of home sales.

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