The bank set a deadline of January 25, 2012 to apply, and amortization limit of 25 years. It also capped the maximum yearly lump-sum payment at 10 per cent of the principal.
With low overnight interest rate set by the Bank of Canada, now at one per cent, Canada major banks clamouring for a piece of a tighter market and cheaper bonds are reasons why mortgages are so low right now
Canada major banks are also pressuring Ottawa to lower the maximum amortization period (the number of years a person has to pay off a mortgage), now set at 30. It had been 40 years
worries over the accumulated debt of Canadians convinced the federal government to lower it over the past two years.
The latest mortgage cut by BMO will likely trigger increased competition among the major banks and be quickly followed by the other major banks to make similar offers as they battle for a share of the shrinking housing market, and reduced borrowing by consumers.
The five-year fixed rate is used by the banks as a benchmark for borrowing costs and is typically the rate applied to first-time homebuyers.
Fixed-rate mortgages are closely tied to what's happening in the bond market, as that's how the banks finance their lending. Variable rate mortgages are more closely linked to the Bank of Canada's rate.
With the Canadian housing market expected to cool in the coming year, the average Canadian home price will rise by only 2.8 per cent this year, Royal LePage said Thursday in its quarterly report, noting the increase would be lower than the rate of inflation.
BMO’s move comes even as the bank’s chief is sounding alarm bells about the sustainability of Canada’s long-running real estate boom.
“I wouldn’t give up on the Canadian housing market, but … there has to be a landing,” BMO CEO Bill Downe told an investor conference Tuesday.
Canada Other major bank CEOs have expressed similar concerns.
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