We’re getting reports that Banks are contacting borrowers 4, 5 and even 6 months prior to maturity. Supposedly, they are calling to ‘offer a great rate, if you sign now!’ Hey, that sounds great. Except the interest rates that we see being offered aren’t really that great. In fact, they are higher than what is available in the wholesale market.
This isn’t anything new. We saw this happen in late 2008 and early 2009. The Banks were telling clients to lock into Fixed rates if they were in Variable (and we told our clients to stick with Variable as interest rates were heading down… sure enough, they did go down)…. And they were offering supposed ‘special rates’ 4 to 6 months prior to maturity. The only problem is that the interest rates being offered were not as good as the Banks made it seem. And the timing of the product offerings were clearly wrong.
What makes this problem even more complex today, is that some of the Banks are offering NO FRILLS mortgages with limited prepayment privileges and NO option to pay the mortgage out in full unless you sell the house. They dangle an attractive interest rate but forget to tell you about the product limitations. STAY away from these products. They will come back to bite you in your bottom….. bottom line, that is.
Here’s some advice… Before signing any renewal offer, speak with your Mortgage Broker… find out if that offer and product are really as good as the Bank makes it seem. The stats tell us that most Canadians will not bother shopping and just sign their renewal offer… and that’s too bad. A 0.40% difference in rate on a $250,000 mortgage will cost you $4774 in the first 5 years alone. Don’t be so quick to sign what the Bank offers you… don’t be complacent….you could pay dearly for it.