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.”