==Perfect Time To Buy Home = All Major Banks Slashes Mortgage Rates To 2.99%==

Royal Bank of Canada was the latest to join the fray late Thursday, after Bank of Montreal fired the first salvo a day earlier by cutting the interest rate on a five-year fixed mortgage half a percentage point.

CIBC and TD Canada Trust were quick to match BMO’s rate, though like RBC, their offer is on a four-year fixed mortgage, one year less than BMO is touting.

BMO’s rivals all said their special rate mortgages come with all the same features as a regular mortgage, while BMO’s contains some restrictions.

The latest rate war echoes a similar one Bank of Montreal launched in January. At that time only two other banks, TD and RBC, jumped in. Both withdrew their offers early citing changes in the bond market, which influences mortgage rates.

This time, Bank of Montreal has upped the ante, adding a 10-year mortgage at 3.99 per cent, which rivals have so far declined to match.

All offers are temporary and expire within a few weeks.

The price war appears at odds with the latest warning from Bank of Canada Governor Mark Carney that Canadian consumers are carrying too much debt.

“Canadian household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest domestic risk,” Carney said Thursday as he held the bank’s trend-setting rate to 1 per cent.

However, the big commercial banks fear a slowing housing market could eat into their loan growth.

“Housing is a big part of the banks’ Canadian lending operations,” said David Madani, a former Bank of Canada economist now with the independent research firm Capital Economics in Toronto. “The mortgage market is a fairly competitive market. So I think we’ll see more of this in the near future.”

Both TD and BMO said their latest offers will help Canadians pay down their debts faster.

TD allows customers to double up their regular mortgage payments any time, and also pay off 15 per cent of their principal once a year.

About 20 per cent of its customers used the annual payment feature in the past 12 months, Farhaneh Haque, director of Mortgage Advice, TD Canada Trust, said in an interview.

“I think it’s a positive sign Canadians are taking advantage of these flexible payment options,” she said.

CIBC also said that all the usual features would apply to its special rate four-year mortgage.

That’s in contrast to BMO, which has attached a number of special conditions to its two new low-rate mortgages.

Both come with a 25-year amortization period, which can make it more expensive to carry than a typical mortgage with a 30-year amortization payback period.

Frank Techar, head of Canadian personal and commercial banking at the Bank of Montreal, defended the shortened amortization period saying it would be “good for Canadians and good for the stability of the Canadian housing market.

“We want to minimize interest rate risk for our customers and help them understand the benefits of paying their mortgage faster.”

The BMO products carry other restrictions as well. Customers can pre-pay and make lump sum payments as long as the total doesn’t exceed 10 per cent of the principal amount owed. Most mortgages let you make monthly and lump sum payments of as much as 20 per cent.

As well, you cannot refinance or switch your mortgage to another lender for the length of the term.

This article was published at http://www.thestar.com/business/article/1143214--td-bank-joins-bmo-in-2-99-per-cent-mortgage