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Is the Bank Worthy of Your Loyalty?

May 9, 2013

A May 4th article by the Toronto Star outlines findings from a Bank of Canada report that confirms what many people already know – it doesn’t pay to stay loyal to your bank.

The article in the Toronto Star refers to a report released from the Bank of Canada in 2011 called ‘Discounting in Mortgage Markets’. The article simply reaffirms a number of truths that many mortgage holders in Canada may already know – that often times, ‘new customers’ get the best offers.

When it comes time to your mortgage renewal, your bank will typically send you a renewal offer letter in the mail a few weeks prior.However; this offer will never be the bank’s best – to get the best mortgage you’ll have to shop around.

Most people figure that the more services they have with a bank, the better deal they will get – but according to a 2011 Bank of Canada study, this is in fact not true.The best incentives are often reserved for new customers – those who could potentially open up new accounts and require services with the lender.

Canadians who don’t take time to inform themselves of the latest mortgage products, or employ the services of a mortgage broker, end up paying more in interest to lenders than they have to. When it comes to renewing your mortgage, the bank will offer you a convenient renewal often at the expense of a higher mortgage rate or poorer mortgage products.

The 2011 Bank of Canada study, ‘Discounting in Mortgage Markets’, found that mortgage brokers tend to find the best rates for their clients; citing mortgage brokers as “a significant factor driving discounts…”, reducing the cost of a mortgage on average by 17.5 basis points – this adds up to thousands of dollars over the life of your mortgage.

Current home owners and First Time Home Buyers alike both benefit from using a mortgage broker to shop the mortgage market for them. Current home owners can save thousands in interest or fees while working with their broker on their mortgage strategy, while First Time Home Buyers will find that a mortgage broker will help address their more modest budgets.

Either way – ask yourself – does my loyalty to my bank pay?