Manulife has rescinded a promotional offer it had been offering consumers of a record-low five-year mortgage rate after Finance Minister Jim Flaherty indicated his displeasure with the lender's decision.
On Tuesday, Manulife Bank dropped its posted interest rate for a five-year fixed-rate mortgage to 2.89 per cent. That's the lowest posted rate for that time frame the company has ever offered. But in an about-face later in the day, the company pulled the offering and reverted to its former rate above three per cent.
"After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate," the company said in a statement.
Earlier this month, Bank of Montreal made headlines by dropping its benchmark five-year rate to 2.99 per cent. Ottawa expressed fears at the time that it might spark a race to the bottom and encourage more reckless borrowing from Canadians at a time when policymakers were urging them to tighten their belts.
"My expectation is that banks will engage in prudent lending — not the type of 'race to the bottom' practices that led to a mortgage crisis in the United States," Finance Minister Jim Flaherty said of BMO's move.
On Tuesday, Flaherty told reporters he was pleased with Manulife's decision to withdraw the offer.
"I had one of my staff call them and indicate my displeasure, which is the same thing I did with BMO, except I called myself," the finance minister said.
But the Opposition questioned the government's tactics in the decision to influence rates at a private lender.
"It's banana republic behaviour… Since when do you use political weight to push back on financial institutions responding to a market parameter that's totally legal?" NDP leader Tom Mulcair told reporters outside the House of Commons on Tuesday.
"There's a huge problem here …This idea that you use the office of a minister to dictate, outside of law, outside of regulations ,is absolutely unacceptable in a free and democratic society," he said.