One leading broker is echoing Jim Flaherty’s concerns about bank irresponsibility, following BMO’s announced 2.99 rate on a 5-year-fixed mortgage Saturday, cautioning an abuse of the public trust.
“When the big banks start abusing their power by lowering interest rates like this, it is not in line with the responsibility that has been afforded them by the federal government,” says Calum Ross
, Verico Calum Ross
BMO lowered its 5-year fixed mortgage rate from 3.09 to 2.99 per cent – a similar move made by the major lender back in January of 2011. The then record-setting low rate precipitated comparable rate changes throughout the lending channel, spurring Finance Minister Jim Flaherty
to change the qualifying mortgage rules to answer concerns that Canadians were taking on too much debt.
Flaherty warned banks not to engage in a “race to the bottom” practice of rate cutting as the spring home buying season kicks into gear – urging prudence so as to avoid the type of mortgage crisis that decimated the U.S. housing market.
However, Ross told MortgageBrokerNews.ca that he would be “extremely surprised” if there were any new rules introduced by Ottawa in the mortgage sector, and that the changes made last June are just now having an impact on the market now, making any further toughening of the mortgage regulations unwarranted.
“The rule changes seem to be working,” he said, referencing the reduced maximum amortization for government-insured mortgages from 30 years to 25, and reduced equity that can be borrowed against a home from 85 per cent to 80 per cent.
In addition, BMO’s 2.99 rate is far from the lowest today, easily beaten by any number of 5-year-fixed rates offered on such websites as RateHub.