Reading Between The Lines

I recently read an article advertising Scotiabank’s push into the 5-year fixed rate war by way of offering 2.97% to clients. I found some of the points in the article to be quite interesting, and have added my $0.02 below.

Bank of Nova Scotia is the latest lender to push the envelope on mortgage rates, offering a five-year fixed rate of 2.97 per cent.That’s the lowest five-year fixed rate among the big banks, and comes in slightly below the 2.99 per cent rate that Bank of Montreal has sparked controversy with in recent years (Bank of Montreal’s current five-year fixed rate is 3.29 per cent).

My Take: 2.95% 5-year fixed has been in the offing by a local credit union with 61 branches in the GTA and surrounding region. This offer has been available for the past three months, so I don’t see what the big deal is behind a 2.97% rate.

When Bank of Montreal and Manulife Bank dropped their five-year fixed rates below 3 per cent in the spring of 2013, they raised the ire of then-finance minister Jim Flaherty, who was trying to curb growing consumer debt levels. But current Finance Minister Joe Oliver has signalled that he wants to be less involved in the mortgage market than his predecessor was.

My Take: This is a good thing. Although lower rates will continue to punish many buyers by keeping prices high, at the rates the cost of borrowing is ultra-low. Therefore it’s a double-edged sword.

There are lower rates in the market. Earlier this month Investors Group had a 1.99 per cent promotion, but that was on three-year variable-rate mortgages. Five-year fixed rates are important because the government requires consumers who are taking out an insured mortgage of less than five years to…

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