News & Resources

BMO and TD Cut 5-Year Mortgage Rates to 2.79%

March 19, 2015
4 mins
Couple in modern living room looking at laptop

It’s a sure sign that spring has arrived - Canada’s mortgage lenders are slashing their rate pricing in anticipation of the busy home buying season. Bank of Montreal is the first lender to make a move, and they’ve set a history-making trend; the lender announced on March 17 that it would offer a five-year fixed mortgage rate at 2.79% - the lowest ever in big bank history.

Not to be outdone, TD Canada Trust matched the rate within a 24-hour period.

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How much would you save with this rate?

BMO and TD’s new rate clocks in at a full 170 basis points below the next big bank rate: 4.49%, offered by Scotiabank. That’s a considerable spread, and has the potential to save homeowners some considerable cash over time.

Let’s assume the following:

- You have a mortgage of $385,200 (average resale price according to Canada Mortgage and Housing Corporation).

- You will have a 25-year amortization

- You plan to pay regular monthly payments only on your mortgage

- You are not a high-ratio home buyer and do not need to pay for default insurance on top of your mortgage.

Monthly Payment at 2.79%: $1,782

Monthly Payment at 4.49%: $2,130

Each month, you would save $348.

Each year, you would save $4,176

Over the course of your 25-year mortgage, you would save $104,400!

Why are rates so low right now?

Now is a great time for any prospective mortgage shopper; both fixed and variable mortgage rates are incredibly low, even compared to last year’s pricing. One reason is competition: buyers tend to be more serious about their home purchases in the spring, as nice weather tempts them into open houses, along with the desire to move before summer vacation kicks in. Lenders know they need to bring their best offers to the table in order to entice buyers’ business.

The second reason for such aggressive pricing is that it’s supported by the current economic environment. Government of Canada bond yields, which set the pricing for fixed mortgage rates, have swung dramatically low over the past six-month period. This gives lenders the room to introduce discounts. Variable mortgage rate pricing, which is set by the Bank of Canada, recently received a cut in January, when the BoC lowered their trend-setting Overnight Lending Rate by 0.25%.

Combined, these factors have set the stage for a very competitive spring season - and a great opportunity for home buyers across the nation.

RATESDOTCA Team

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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