September 25, 2020

Mortgage deals likely to remain tempting

Peter Hadzipetros, Global News

That record-low mortgage offer touted by the Bank of Montreal two weeks ago may be history, but there are plenty of bargains still available.

BMO – the fourth-largest of Canada’s five biggest banks – was offering a five-year mortgage at 2.99 per cent, but only if it was amortized over a maximum of 25 years. There were other conditions as well.

The deal created a stir and got other banks to quickly offer similar packages to try to attract mortgage customers at a time of year when the housing market is traditionally fairly quiet.

“We got customers’ attention,” said Katie Archdekin, head of mortgage products at Bank of Montreal. She wouldn’t say whether that attention translated into a major jump in new mortgages.


ING DIRECT: 10 years @ 3.99%
SCOTIABANK, CIBC: 4 years @ 2.99%, no expiry date
CIBC, TD CANADA TRUST: 4 years @ 2.99%, until late Feb.

That deal expired on Jan. 25 – but some of the other banks have other “special offers” that carry the 2.99 per cent rate over three or four years.

Those offers at TD Canada Trust and Royal Bank are good until the end of next month and are not limited to 25-year amortizations. The four-year 2.99 per cent offers at CIBC and ScotiaBank have no set expiry date.

Both are also offering seven-year terms at 3.99 per cent. ING Direct is offering an unheard of 3.99 per cent on a 10-year term.

BMO says despite the end of the special offer, they intend to remain competitive on rates.

Focus on rates

Research conducted by the Canadian Association of Accredited Mortgage Professionals CAAMP) – the organization that represents mortgage brokers – suggests that people focus mostly on rates when they’re looking at taking on a mortgage.

“When you’re offering products at historic lows, you’re going to get some interest,” CAAMP president Jim Murphy told

But offers like these may just be shifting business that might have happened later in the year to the first couple of months.

“At the end of the day, this is generally slower period of the year and lenders may feel this won’t be as active a year. So they’re trying to attract business by offering these special products.”

The housing market has shown signs of cooling off in recent months. In its latest report on sales activity, the Canadian Real Estate Association (CREA) noted that a slight increase in sales coupled with an increase in houses listed for sale has resulted in a “balanced” market.

CREA said the national average home price rose by 0.9 per cent between December 2010 and December 2011, the smallest year-over-year increase since October 2010.

Add to the mix the announcement on Jan. 25 by the U.S. Federal Reserve that record-low interest rates will stay in place well into 2014 in an attempt to get a stubbornly-sluggish economy going again, and you’ve got the right atmosphere for mortgage rate bargains to continue.

One concern is that low rates could tempt people to borrow more than they should, which could pump up house prices in some markets like Toronto and Vancouver. Federal finance minister Jim Flaherty has already suggested that he could further tighten mortgage rules to help keep a lid on price spikes.

Katie Archdekin says BMO’s special low-rate mortgage offer was aimed at encouraging “responsible borrowing.” Their mortgage customers, she says, want to pay off their mortgage more quickly, a key reason the offer was limited to mortgages amortized over no more than 25 years. She remains confident that the housing market will remain in good shape.

“The stability that we’ve seen now for a long time is helping to keep housing in Canada affordable. The expectation is that housing over the next year or two will continue to stabilize.”

Jim Murphy echoes that sentiment and is optimistic about rates over the next year-and-a-half. But rates will eventually rise and those taking out mortgages need to be careful.

“People should be very mindful of what they’re borrowing, so that they don’t get in trouble when rates go up. But if you lock in for 10 years at under four per cent, well, that’s a very long time.”

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