The Bank of Montreal has temporarily cut its five-year fixed mortgage to 2.99 per cent — the lowest posted rate from a major bank in Canadian history.
BMO announced Thursday it was slashing the rate by a half a percentage point, in a move expected to boost competition among the big banks vying for real estate customers.
Some conditions are attached to the offer, which ends Jan. 25, including that lump sum payments are limited to 10 per cent of the principal each year. The mortgage is also based on a 25-year amortization period.
Other banks are expected to follow suit. On Wednesday, Toronto-Dominion Bank moved its posted six-year rate 132 basis points lower to 3.79 per cent and the posted seven-year fixed rate 91 basis points lower to 3.99 per cent.
The five-year rate is the mortage industry's benchmark, as it is by far the most common term for a first-time homebuyer. Borrowers can often negotiate a better rate from a bank based on their credit history, but the posted rates at banks are seen as a benchmark for their mortgage offerings.
The promotion comes amid forecasts that the Canadian housing market might cool off in 2012.
In its quarterly forecast, Royal LePage said Thursday it expects the average home price in Canada to increase by 2.8 per cent — less than the inflation rate — in 2012.