The spring housing market is expected to bring on a new battle from mortgage lenders as they compete for what has become a shrinking pie in the form of lower real estate sales.

Bank of Montreal struck first on Friday with a five-year closed mortgage rate of 2.99 per cent — down from 3.09 per cent and now the lowest published rate among the big banks — with sources indicating the financial institution’s mortgage specialists are armed with discretionary power to go as low as...