Bank of Montreal lowered the rate on its BMO Smart Fixed Mortgage 20 basis points to 2.79 per cent today. Will other banks follow suit?
In an announcement on St. Patrick's Day, BMO is expecting to help Canadian homeowners save some green this upcoming home buying season by lowering the rate on its BMO Smart Fixed Mortgage from 2.99 per cent to 2.79 per cent.
"Buying a home is one of the biggest decisions and financial commitments Canadians will make in their lifetime, so it's critical that home buyers get the help they need to make the right mortgage decision," said Cam Fowler, Group Head, Canadian Personal and Commercial Banking, BMO Financial Group in the announcement. "Choosing a longer term, such as five years, along with a great rate will help Canadians own their home sooner while saving them thousands in interest payments over the life of the mortgage."
The announcement follows the Bank of Canada's surprise drop in the overnight interest rate in January to 0.75 per cent (from 1 per cent), and March's decision to leave it be.
- Related Read: Bank of Canada Unexpectedly Cuts Interest Rate To 0.75 per cent
- Related Read: Bank Of Canada Maintains 0.75 Per Cent Interest Rate
However, fixed rates are not directly affected by the overnight lending rate. Instead, fixed rates are affected primarily by Government of Canada bond yields (with a corresponding maturity) that since the January announcement, have happened to trend lower.
The CBC reports that although the lower rate is precedent setting, it's not the lowest mortgage rate out there, as alternative lenders have been pricing at that level for some time. Even so, Penelope Graham of RateSupermarket.ca told the CBC, "It's a big deal."
- See what mortgage rates are available today at KANETIX.ca.
"This is the time of year when lenders get competitive about pricing," Graham said. "Speaking from precedent, what we've seen in the past is that the others don't immediately rush to match. But there's nothing to say they won't this year."