BMO’s Door Crasher Variable Rate

BMO Mortgage Rate SaleBMO has come out swinging with its latest spring promo.

The country’s fourth largest bank is advertising a red-hot prime – 1.00% variable. At 2.45% currently, it’s now the best variable rate for refis in the country.

This special is also the largest widely advertised big-bank variable discount we’ve ever seen.

As of press time, we’re still getting details and will post them here when we do. For now, here’s what we know:

  • It applies to purchases, transfers and refinances
  • It’s not available to current BMO borrowers coming up for renewal (can you hear that hissing sound from BMO’s existing customers?)
  • The maximum amortization is 25 years
  • It is optionally available with BMO’s ReadiLine readvanceable mortgage (line of credit)
  • It’s a standard charge mortgage for cheap easy switching of lenders at maturity, unless you get it in a BMO ReadiLine (which is registered as a collateral charge)
  • BMO will guarantee this discount up to 130 days if you apply before the promo is over
  • The mortgage rate is compounded monthly — which, on a typical $200,000 mortgage, costs you about $118 more over five years than semi-annual compounding
  • BMO says the promo will expire at the “end of May”
  • BMO’s variable rate mortgage is not portable, which is a deal killer for some.

Finally a Big 6 Bank Shows Signs of Life

BMO’s move is a counter-attack on HSBC, which has dominated the uninsured variable-rate market for two months with its prime – 0.96% (2.49%) special. Prior to this, no Canadian bank has openly gone head to head with the multinational giant.

The move also marks a long and steady improvement in floating rates in general. Competitive variable rates were as poor as prime – 0.20% back in early 2012. Back then, some speculated that we may never see prime – 1.00% again. But variable discounts have been improving ever since.


Latest Canadian bank rates. Latest BMO mortgage rates.

 


14 Comments

  • This is not the same as prime -1% from several years ago. It’s more like prime -0.8, since they padded 20bps (2x10bps) over last few years. I’m referring to the BoC dropping prime by 25bps, while the banks dropped their prime by 15.

  • Mark says:

    That may be, but when was the last time you saw a major bank advertise even prime – .80%?

  • @Mark, last year TD advertised a 5yr variable for 1.99%.
    I do agree 2.45 is a great rate.

  • Mark says:

    Last year prime rate was 3/4 per cent lower.

  • And TD’s mortgage prime rate was 2.85 (vs 3.6 now).

  • Just got an offer from our BMO financial services manager to early renew at 2.5%, with 4yrs left. Current rate is prime minus 50 or 2.95% and it is a rental. The interest savings will significantly exceed the prepayment penalty.

  • Ogopogo says:

    Curious at what do people do when they are say 2 years out from completing a 5 yr variable P -.60?

    In my situation- the balance is less than $175kand the 3 month penalty eats into the further .40 discount.
    My credit union in BC offerIng no option to match. Give me 2.99 for fixed 2 yr. This will give .14 higher than 2.85% but will buffer 1 potential increase.

    Some brokers won’t give me the time because of the small balance.

  • Melanie says:

    Hi Ogopogo,

    A few questions for you:

    1) Is your mortgage presently insured?
    2) What is your home value?
    3) Do you want to switch to a new lender and keep the same balance and amortization?

    Cheers,
    Melanie

    Mortgage Broker
    intelliMortgage Inc.
    FSCO# 12326

  • Ogopogo says:

    Hi Melanie,
    1) Not insured
    2) 1.7-1.9 mil gvr region
    3) same balance and amortization . Going to another lender is option only if it makes financial sense. Unsure if there is any other fees involved eg: lawyer, etc

    Thanks Melanie

  • And I forgot to mention, that early renewal offer is on a mortgage with a 30yr amortization.

  • Melanie says:

    Hi Ogopogo,

    Assuming you meet the other insurable qualifications, there’s a chance you’d qualify for as low as 2.35%, perhaps even lower.

    There should be no discharge or appraisal fee. But if your mortgage is a collateral charge (which is common for credit union mortgages) then there would be a ~$795 collateral charge transfer fee.

    The nominal cost difference between 2.85% and 2.35% is about $4,100 on a $175,000 loan amount — more than enough to cover a standard 3-month interest penalty plus closing costs.

    Cheers,
    Melanie

    Mortgage Broker
    intelliMortgage Inc.
    FSCO# 12326

  • Ryan W says:

    Melanie,

    BMO has an appraisal fee which I requested to be waived. They also have legal fees to move from another institution. About $350 for an appraisal and $350 for the transfer fees. I could no negotiate the transfer fees to be waived.

    I doubt they will go down to 2.35%, they have no reason to as they haven’t much for competition at these rates. TD would do 2.44% at best…I’m still waiting to see if BMO will come down a little.

    $4,100 in savings over a $175,000 loan is not correct. You leave out the fact you will be renegotiating your mortgage again in 5 years, and who knows what rates will be at. This is a 5 year window you are looking at so you must see if the savings within 5 years makes enough sense.

  • Melanie says:

    Hi Ryan,

    2.35% was an effective rate available through another lender, not BMO. In fact, there are now a few different lender options at this rate or below. There is also now one lender offering free closing costs at this rate for refinances.

    $4,100 is not the “savings.” Like I mentioned, it refers specifically to the nominal interest cost difference between 2.85% and 2.35% on Ogopogo’s $175,000 mortgage. It may be a little bit higher or lower depending on the remaining amortization.

    To determine the true economic benefit of switching lenders, you’d essentially deduct the closing costs and penalty from the present value of that amount. If you’re comparing two standard traditionally registered mortgages, the switch costs at maturity and future rates are mostly irrelevant to the decision of which five-year variable term is best today (since variable rates on existing mortgages generally move up or down together).

    Cheers,
    Melanie

    Mortgage Broker
    intelliMortgage Inc.
    FSCO# 12326

Leave a Reply

Your email address will not be published. Required fields are marked *