Canadian homeowners and buyers enjoy the lowest interest rates ever!
Canadians thinking about locking in their mortgage just got a compelling reason to do so — the lowest interest rate in history.
The Bank of Montreal cut the rate on its closed five-year fixed mortgage to 2.99%, a half a percentage point drop that is expected to set up a wave of competition among the banks as they fight for market share in a shrinking real estate market.
“That’s the lowest anybody has ever seen from one of the major lenders ever,” said Rob McLister, editor of Canadian Mortgage Trends, adding mortgage specialists at Royal Bank have told him their financial institution has vowed to match any cuts.
The BMO offer does come with some catches, namely customers can only pay 10% of the mortgage principal in a lump sum payment per year as compared with the usual 20%. Monthly payments can only be increased by 10% instead of the usual 20%.
More importantly the offer, which is available until Jan. 25, stipulates that consumers must accept an amortization of just 25 years instead of 30 — something a number of banks have been pushing the government to regulate again. Ottawa has already lowered amortization from 40 years to 35 and then 30 over the last three years.
A shorter amortization has the effect of lowering the amount of debt Canadians can take on by increasing their monthly payments. At the same time, it does get them to pay off their debt quicker.
While the rate reductions will help boost the spring market, the lower rates are also helping Canadians to get out of debt as savings from lower interest rates is being applied to outstanding debt.
For the full story, please see http://business.financialpost.com/2012/01/12/bmo-rates-hit-all-time-low.
Source: Garry Marr, Financial Post