It must be spring in the mortgage market. You can tell because BMO is making headlines again with a cut-rate mortgage.
The bank announced today that it is slashing its Smart Fixed Mortgage rate to 2.79%. That’s the lowest advertised 5-year fixed rate of any big bank. Of course, most well-qualified borrowers know that banks routinely quote below their advertised rates.
Many will remember BMO’s Smart Fixed Mortgage by a different name. It used to be called the “Low Rate Mortgage,” a product that landed in the crosshairs of the late Finance Minister Jim Flaherty. A few years back, Flaherty accused BMO of overstoking mortgage demand with its 2.99% promotions, and he “strongly encouraged” the bank to pull those specials.
In essence, the new name is just a branding change. The Smart Fixed Mortgage has the same fine print as the old Low Rate Mortgage. In other words,
- You can’t leave BMO for five years unless you sell the property (although you can refinance with BMO)
- The prepayment privileges are lower (10% annually vs. BMO’s normal 20%)
- The maximum amortization is 25 years (vs. 30 for BMO’s regular conventional mortgages)
- You can’t get this mortgage in a ReadiLine line of credit
- It doesn’t come with BMO’s nifty Cash Account
- Skip a Payment is not available (it is on BMO’s regular mortgages)
- The prepayment penalty is still based on posted rates (i.e., much higher than some other lenders).
If you shop around and you’re a strong borrower (i.e., someone with great credit, stable income, a marketable property, reasonable debt ratios, etc.), you can probably find a BMO mortgage specialist willing to sell this product, or perhaps even its regular “full frills” mortgage, at 2.74% or less. The other major banks are already selling at that rate or below on a discretionary basis.
And don’t forget to look beyond the bank universe. For weeks now, other lenders and brokers have been quoting five-year money for at least 0.10 to 0.20 percentage points less than this BMO offer, often with better features.