September 2, 2010
Just as the Bank of Canada is calling for retail banks to practice diligence and conservatism to ensure no housing bubble materializes, BMO has taken a highly short-sighted step by lowering its 5 year fixed mortgage rate.
According to the Financial Post:
The move which takes effect Thursday brings the bank’s key five-year rate to 3.59%, down from 3.79%, making it one of the lowest five-year rates ever offered by a Canadian bank, says industry newsletter Canadian Mortgage Trends.
I mean, I’ve been writing posts lately about how Canada isn’t in a housing bubble, and I still don’t think we are, but apparently BMO wants us to be. It’s like when you have a dog that might bite, and you just pull on its tail a bit to see if it will.
They’re certainly going against the directed policy of the federal government and the Bank of Canada. Harper introduced new regulations to discourage speculation by increasing the minimum downpayment for investment properties in the Spring. The Bank of Canada raised the target overnight interest rate (though it has cooled off on this initiative in the wake of lower-than-expected growth numbers). So what the hell? Why is BMO taking it upon itself to go against the grain? I guess the answer is pretty simple: short term profits.
BMO’s profits were up in the third quarter by 20%, but still fell short of expectations. Maybe this is a way to ensure they reach market expectations the next time?
BMO is not living up to their slogan of “making money make sense”. This doesn’t make any sense. It’s short-sighted at best, and downright stupid at worst.