By: Ian Mucignat, CFA
Customer loyalty to one’s bank of choice has historically been very Canadian. We love our banks. “This is my bank; surely they’ll return the love.”
Canadians are starting to take off the rose coloured glasses and see the banks for what they truly are; businesses designed to generate profits for shareholders. Loyalty doesn’t mean what it used to and here is a case in point to prove it.
It is a common occurrence in my work as an independent mortgage broker agent that a client provides me with the mortgage renewal offer they got from their bank. A recent client of mine was offered Prime rate minus 0.55% on the renewal for a 5-year closed, variable term mortgage. The exact same bank, at the exact same time offers me Prime minus 0.65% for clients. My client has great income, great credit, always made timely payments, and should have been given the better offer as an existing customer.
Why don’t the banks offer their existing customers the best possible rate? They understand the principle of inertia. Inertia is that physics law that you learned in high school. You know, the principle that all physical objects are resistant to any change in its state of motion. Your bank, relies on the fact that most customers do not shop around at renewal time because they are either too busy, too loyal, or naïve enough to think that they will be offered the best possible rate and mortgage terms.
So what should you do? If you’ve never consulted with a mortgage broker or agent then you should give it serious consideration. A broker/agent will only give you upside on your financing solution. There is no cost to the borrower because brokers are paid by the eventual lender.
It’s best to contact a reputable mortgage broker at least 6-months prior to the renewal date. This gives the broker time to understand your needs and unique circumstances, do their research and educate you on your options. They can obtain rate guarantees well in advance of the renewal date that will come in handy when interest rates inevitably rise.
About the Author:
Ian Mucignat is a mortgage agent at TMG The Mortgage Group. He is an industry expert having served in variety of roles at Canadian schedule I banks and lenders for 14 years, including his last role of Vice President. Ian completed his Chartered Financial Analyst designation and his Bachelor of Business Administration, with a minor in Economics, at Wilfrid Laurier University.
Rona Birenbaum is a certified Financial Planner and is licensed to do financial planning. Rona is registered through separate organizations for each purpose and as such, you may be dealing with more than one entity depending on the products purchased. Rona is registered through Caring-for-Clients for financial planning services. This website is not meant as a solicitation for financial advisory services. Financial advisory services are available through the facilities of Queensbury Strategies Inc. Financial Planning is not the business of or under the supervision of Queensbury Strategies Inc. and Queensbury will not be liable or responsible for such activities.