If you don’t think banks discriminate when deciding who gets the best mortgage rates... you may want to check out this report released by the Bank of Canada.
Getting the Best Mortgage Rate
According to their research, the Canadians who get the best mortgage rates are those who fall into the following groups...some of which might surprise you!
Education and Bargaining Skill
Research proves that bank profits are significantly higher in haggle environments. As a result, banks prefer not to put all of their cards on the table. This leads to price discrimination whereby banks give better deals to skilled negotiators and well-informed borrowers.
Larger Mortgages
Since few negotiate the renewal of their mortgage… This provides lenders with an incentive to attract consumers with larger loans and large outstanding balances at the time of renewal.
Use a Mortgage Broker
Applicants using a Mortgage Broker received reduced rates. The average client saved 17.5 basis points on their mortgage interest rate. That saved clients with a $200,000 mortgage ~$1,670 in interest payments over five years.
Clients Overall Portfolio – Non-Mortgage Business Potential
Branch managers have an incentive to offer larger discounts to consumers that are, or will be, more profitable to the bank. If you’re not going to invest with them, buy insurance from them or use their debit machines, Banks are less likely to aggressively pursue your mortgage.
The Power of Your Down-Payment
Those who put the minimum down (e.g., 5%) pay higher rates than other borrowers—about 12 basis points more than those who have 15% or more as a down payment.
Newer Client’s vs. Existing Bank Clients
New clients receive larger discounts than existing clients, on the order of 10 basis points. Sad but true... Banks know that a large percentage of Canadian mortgage consumers (80%) simply renew their mortgages without shopping around for better rates and terms so they choose to give greater discounts to attract new clients.
Access to Smaller Lenders
We conclude that the larger a bank’s market share, the higher are the rates that it can charge to borrowers. Borrowers who are new clients at one of the Big 8 banks receive less of a discount than borrowers who are new clients elsewhere.
Rich Man – Poor Man
Poorer borrowers face greater levels of price discrimination when bargaining in person at the branch than they do when transacting through a broker.
Clients with Better Credit
Financial institutions offer better rates to high credit score consumers.
Protect yourself by being informed.
Domenic Mirabelli
Mortgage Intelligence
416.303.4480
domenic.mirabelli@migroup.ca
"Helping you find a mortgage...and peace of mind"
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