BMO extends 2.99 offer

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The rate wars are over. Oops. Better hold that thought.

The instigator of the latest conflict, BMO, has effectively extended its infamous offer of 2.99 per cent on a five-year fixed.

Consumers bringing in a written offer mailed to them by BMO now have until April 19 to access that rate.

BMO is suggesting that mailing will be limited to “clients and various people in certain areas that we thought might be a fit.” Mortgage brokers, themselves are now reporting that they too have received the invitation card in the post.

News of the extension is sending shock waves through the broker and banking communities and comes as both camps celebrate the end of this latest round of the rate wars.

BMO’s 2.99 offer on a stripped-down mortgage, introduced early this month, was officially slated to close on March 28. Most banks and mono-lines that countered the offer with the same rate on a four-year term had timed them to end Thursday.

They may now be forced to rethink that strategy depending on how widespread the BMO offer.

Still, some banks appear fed up with the rock-bottom rate competition and the punishing effect it has had on their profit margins.

"Some of those rate wars have taken these returns down to unacceptable levels for our shareholders,"

David McKay, RBC’s country head said at a Montreal conference Thursday. “You hate doing business at 2.99 and making such low-to-negligible margins for five years."

Execs at the other Big Six are now seconding that, following Thursday’s collective move to end three weeks of discounting that brought fixed rates to their lowest levels in decades at the same time it brought profit margins to their knees.

McKay suggests that the compromise did little to insulate RBC and others from the effects of margin cutting on the bottom line.

For brokers, it challenged attempts to retain clients and keep them from retreating to the familiarity of a big bank name coupled with exceptionally low rates.

Many were breathing a sigh of relief Friday before the BMO extension went public.

“Glad to hear they (the banks) are sick of (the 2.99 rates), and so am I,” wrote Edmonton broker Len Lane, owner of Verico Brokers For Life. “Let’s all go make some money.”

  • Jim A. on 2012-03-31 5:46:25 AM

    That's is fine with me. This gives me and firm more leverage by pointing out the cons compared to the single pro dealing with BMO. I like the fact I can explain to my clients ghow a 4 year fixed for 2.98% is much better with the better ammortization and pre payment prvilidge then what BMO is offering. Thank you BMO.

  • Murray Savage on 2012-03-31 6:13:18 AM

    the 5 year term is not the way to go. 10 years at 3.89% is the winner hands down.

  • Elfie Hayes on 2012-03-31 6:14:09 AM

    We didn't lose anyone who called us before when BMO slashed their own wrists to get business. I'm not concerned about it now. There is no profit to their investors and they will soon rethink a relationship with a bank that keeps them tied to such poor investment rates for 5 years. I'm going back to what I do and that's educating my clients about how to get the "right' mortgage to meet their financial goals and I'm not going to public one single thing about BMO. It's all the news reports and blogs that help them promote this self defeating activity. In the end those of us who have the client's best interest in mind will still be standing.

  • Kenzie MacDermid on 2012-03-31 6:42:08 AM

    This move will only serve to hurt their customers in the future by trapping them into a bad product. Buyer beware i guess. In my mind its not different than the collateral mortgage's clients are being tricked into these day. These banks that practice this way only serve themselves and will eventually soil their reputation. Where is Jim Flaherty now....

  • Angela Wong-Liao, Invis Inc on 2012-03-31 9:33:55 AM

    I agree with Elfie Hayes, a prudent mortgage professional should be focusing on mortgage products which can meet our clients' needs and expectations. Frankly, I do not understand why BMO keeps on taking this "Dumping" business practice, it is a short term gain but long term pain business approach because they are buying market share by cutting their profit margin, if I am a BMO shareholder, I may consider of selling BMO stocks.

  • Bruce Flanagan, Premiere Mortgage Centre on 2012-03-31 11:48:14 AM

    A self serving desperation move by the weakest of the big five. No accident they have lost 50% of their market share in the last 5 years when they rely on grandstanding efforts that simply cheapen the work of the mortgage professionals in the industry to satisfy client needs and provide financial advice. They have managed to disrupt the spring real estate market with the continuous jigging of the rate lure and bringing the ire of the federal authorities and fueling the anti-real estate sentiment of the media. In BMO's greedy pursuit of mortgage renewal business they have set in motion a pandemonium of mortgage rate fluctuations, fears of rate increases, house price slides and general anxiety in the market. nice work BMO!

  • Elfie Hayes on 2012-04-03 6:14:26 AM

    Great comments!! Is anyone at BMO reading what we say? Maybe we should send the CEO the link to this blog. My dad always said,"give some guys enough rope and they'll hang themselves". Seems appropriate now.

  • Angela Wong-Liao, Invis Inc on 2012-04-06 6:44:50 AM

    Enough is enough, that is why no other FI are matching BMO's current extension and BMO is becoming a loner in the banking community.

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