There are 2 news announcements that came down the pipe today...I'm sure there are more than just 2; however, I will highlight a couple for you. Starting with the Bank of Canada maintaining their overnight rate of just 1%. The overnight rate has been held at 1% since September 2010. This in turn keeps the Prime rate at 3%. For those of you in variable interest rate products, your payments essentially stay the same. According to a Reuters Poll, Prime is expected to remain the same until the second quarter of 2013.
The next announcement this morning was from BMO as they released their 2.99% special for a 5 year fixed rate and a 3.99% for a 10 year fixed rate. Reality check, this created a ton of buzz in the Mortgage Industry last month when they did the same but these specials are highly restrictive and are definitely not for everyone. It does create a nice sticker appeal and may draw large crowds into a branch; however, their goal may be to upsell you into a different, less restrictive product once you're there. I can't speak for the other BMO products offered as BMO pulled out of the Mortgage Broker market in 2007, hiring their own Mobile Mortgage Brokers who focus directly on their own products. It has been mentioned on numerous blogs and news articles that BMO is giving the Bank of Canada a slap in the face with issuing such a product, I'll let you decide.
Some of the mortgage restrictions on the 5 and 10 year specials are as follows:
-maximum 25 year amortization
-maximum lump sum payment of 10% per year
-maximum payment increase of 10% per year
-a locked term
***this rate is fully closed unless you sell, refinance with BMO or renew with BMO
Unless you decide to sell and pay a large penalty, you will be stuck with BMO for 5 years. Another note to think about is depending on the source, the average mortgage term is anywhere from 3.5 - 3.7 years before switching and jumping into a better product or simply refinancing.
Many lenders responded very quick out of the gate the last time BMO ran this rate special, offering a 4 year fixed rate at 2.99% with all of the flexibilities. Canadian Mortgage Trends reports that TD Canada Trust and RBC will not price match at this time, only time will tell. The 4 year rate specials were brilliant in my mind, especially since they offered all of the flexibilities and given the average mortgage term is essentially just shy of 4 years.
A few months back, I posted a video blog (vlog) that highlighted the total cost of borrowing. I think this is an important piece to bring back and highlight so feel free to click the link to view "Total Cost of Borrowing". Interest rates are the hook, the bait so to speak when it comes to mortgages. Some of the lowest discounted rates are just not attainable by everyone, they are very specific. I encourage you to contact a mortgage professional like myself for your free consultation, we can quickly determine a product that is perfect for you and lead you in the right direction to saving you time, money and stress. Remember, mortgage interest rates can save you hundreds, mortgage flexibility can save you thousands!
As always, I encourage you to contact me if you have any questions with your current mortgage or are looking for one. Please find me on facebook at Jason Nesseth | Mortgage Specialist | British Columbia and on twitter @jasonmortgages.
"Working with you for the life of your mortgage"
Jason Nesseth with TMG The Mortgage Group Canada Inc. If you have any questions or comments about this blog, please feel free to call Jason at 604.375.7375, email jason.n@mortgagegroup.com or visit his website at jasonnesseth.com