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TagBank profits

TD & RBC raised the POSTED rate… but not their REAL rates

Rate Image, May 2018

Much has been written about last week’s Posted rate hikes by TD and RBC. Don’t panic! This is just their posted rate – it’s not the actual rate they give to clients.

I do, however, think we’ll see a minimal rate hike in the coming weeks due to five-year Government of Canada bond yields increasing slightly. Fixed rates are priced closely to bond yields.

Continue reading “TD & RBC raised the POSTED rate… but not their REAL rates”

BIG SIX BANKs report obscene RECORD $34billion in profits for 2015…and still complaining!

greedy banker It’s that time of the year again..  The Banks have to report their annual profits.. And no surprise, the BIG SIX BANKS are at it again..

RBC reported a $10billion annual profit for 2015.  This is the first time a Canadian company reported an annual $10billion profit.  Yet, at the same time, they are crying the blues and warning of troubled times ahead. (uh, that’s the same speech they’ve made for the past 10 years.. here’s a 2013 headline).  GIVE ME A BREAK!!!  Canadians aren’t buying it anymore..

Check out the obscene profits pulled in by the rest of the BIG SIX BANKS..

Continue reading “BIG SIX BANKs report obscene RECORD $34billion in profits for 2015…and still complaining!”

BIG BANKS need your help for higher profits!!

The more I think about it, the more fired up I get!   OSFI (Office of the Superintendent of Financial Institutions) has come out and said Bank profit margins are shrinking and the BIG Banks may start to loosen their credit lending policies in order to write more business and therefore earn more profit.

This statement just doesn’t make any sense…. let’s think about this for a minute… Take a look at Financial Post’s Biggest Companies ranked by profit in 2010.…let’s see where the Banks rank:

– #2 is RBC $5.2 billion

-#3 is TD Bank $4.6 billion

– #4 Bank of Nova Scotia $4.2 billion

– #9 Bank of Montreal  $2.9 billion

– #12 CIBC $2.4 billion

Five of the top twelve most profitable companies are Banks!!!  This doesn’t look like the Banks are hurting that badly, does it?  We should also not forget that the govt has made several changes to mortgage lending rules…It’s already harder to qualify for a mortgage and line of credit…  So what gives, OSFI??

Look, OSFI has spoken and we must not ignore this….I don’t like what they are saying and the logic they are trying to give us doesn’t make sense….But we can’t bury our head in the sand either… The Banks have too much power… We should prepare ourselves for changes… Make plans and adjust accordingly… Don’t wait for the Banks to act.

It’s clear to me that we could see some changes in lending policies…My guess is this will translate to some increased rates on your secured lines of credit, a possible review of your account, even a reduction in your limit… That’ right, the banks can even call your line of credit and ask you to repay it in full…!! They might ask you to lock into a fixed rate mortgage or get into an amortized repayment schedule instead of just paying interest only.

But it doesn’t end there… commercial accounts will also be under the magnifying glass, in my opinion.  Commercial loans and mortgages get reviewed annually by the Banks…This is why it’s very important to choose your commercial lender carefully… Not all Banks are alike… there are some institutions that offer commercial loans that are not callable…

Bottom line is to be aware, stay informed and act accordingly…. If you are not sure where you fit in with these possible changes, give me a call.. I’m happy to help.

Banks quick to raise but slow to lower rates

Nothing new about this story…. Since April 11-2011, the 5 year bond yields went from 2.87%,  down to 2.10% on June 24th, and have gone up slightly to 2.34% on July 1st….  Remember, fixed rates are closely tied to the govt of Canada bond yields…So that means the Banks would have lowered their fixed rates accordingly and then raise them slightly, right?

Well, not really…  On April 11th, the Big Six Banks posted rates were 5.69%.. they went down slightly to 5.39% recently but are back up to 5.54%…   What’s wrong with math…?  Why didn’t the Banks reduce their rates accordingly?    It’s called MAXIMIZING your PROFIT…  The banks want to earn a little more at the borrowers expense.

I find it kinda funny but also frustrating when I see articles reporting that Bank profit margins on mortgages is shrinking…  The spread between the 5 year bond yield and the posted 5 year fixed rate is around 3.20%…  and historically, it’s been around 2.50% and sometimes even as low as 2.00%….  Where’s the fierce competition, I wonder?

Banks are a business that want to maximize their profits… Let’s not forget this.

TD and RBC CEO’s income $11million each for 2010…

Are the BIG SIX Bank CEO’s that good?

It’s that time of the year again… when Bank CEO salaries have to be reported… TD’s CEO Ed Clark earned $11.3million on profits of $4.6billion in 2010, RBC’s CEO Gord Nixon pocketed $11million. Congratulations….!   Staggering numbers considering that we are just coming out of (hopefully) the worst recession ever… click here for more on Bank salaries.

So what’s the problem?

There has been so much publicity about how strong our Canadian Banking system has been through this recession…. And yes, it’s true.. we have held it together very well.  But was it that our Bankers were that smart or just that far behind the times??

It has been said that Canada is always 5 years behind the U.S. Ever heard that saying?  Well, it’s true for many things, including Banking and Financial Services…   In 2006, we saw the introduction of 30, 35 and then 40 year amortization mortgages. We also saw $0 money down mortgages….. Interest only mortgages!! 107% loan to value financing!!!

These products were beginning to gain some popularity in Canada.. but then in October 2008, the U.S. mortgage crisis hit… and all the new products were pulled from the shelf.   Imagine if these products were introduced to Canada 5 years earlier…. Imagine how many of us would have been affected….  Don’t be fooled into believing that it was our Banking system that saved us…

Look, the plain truth is that we got lucky… we were a bit slow to embrace these products… and that’s really our infamous Canadian conservatism coming out… It’s got nothing to do with our Bankers being that much smarter… It’s got everything to do with you, the general public, the average Canadian, not taking to change quickly…. This is the real reason we didn’t suffer a worse fate.

How much did mortgage penalties contribute to Bank Profits?

Here’s a bit of math to play with…. Statistics tell us that on average, Canadians move or refinance their mortgage every three years…. The stats also tell us that approximately 75% of all mortgages are in a fixed rate term… I would venture to guess that probably 95% of those are in a 5 year fixed rate….  Okay, so now let’s look what the average penalty would cost you to break your mortgage…

And today, I have another example that I will share with you… it’s about a young couple that needed some help….  (I get these almost daily, by the way)….

A $250k mortgage with a 5.15% rate with 28 months til maturity…  The penalty quote to break the mortgage was $11k... I gave some advice and helped to get it down to $8k...    That penalty still works out to over 7 months interest. Can you say ka-ching!!   The Banks have made an absolute fortune on the backs of unsuspecting Canadians….

The Govt and the Banks should tighten credit card rules

Last November, the Banks pressured the Federal Govt to tighten mortgage lending, to make it harder to take a Variable Rate Mortgage… to make it harder to refinance your debts into a mortgage….  The results are bad for Canadians.. we now have to take a 5 year fixed rate mortgage in many cases… we now have to keep our higher interest credit card debt, loans, and other debt….  Canadians are being forced to keep these higher interest debts while Banks increase their profit margins…  Here’s a great article about Household Debt..

By the way, there are no rules for giving out a credit card…

Why did these lenders stop dealing with Mortgage Brokers?

Great article today in The Globe and Mail… Ok, so why am I promoting an article that talks about NOT dealing with Brokers?   The article says, RBC, BMO and now HSBC are not dealing with Mortgage Brokers (RBC never dealt directly but they do put money out through RBC Securities…BMO stopped a few years ago and HSBC just stopped).

The article quoted Marcia Moffat, VP Home Equity Financing, RBC.  I have my opinion but what do you think about what she said?…. “The mortgage market is extremely competitive, so the reality is that there is little to no difference between bank rates and broker rates.”

Well, that statement sparked a flurry of comments… read the comments section of the article.. including some words from CanadaMortgageNews.ca.  As recent as a few weeks ago, I had client asked if I could give them a letter stating what my rate was so they could take it to their RBC branch and the branch could match my rate… and  this happens all the time…

The Banks are a business and want to make a profit…. you heard me say this before?  I must repeat it again…far too many don’t believe it…  The Banks want you to take the 5 year fixed rate mortgage… it’s the most profitable product for them…

Remember, a few months ago, I wrote about the government introducing new mortgage rules that make it harder to qualify for variable rate and shorter term mortgages (1 to 4 years)….  you must now qualify using the Bank Posted 5 year fixed rate…  that’s 6.10% today!!   Or you can qualify at the contract rate (fully discounted rate) of the 5 year fixed rate mortgage product….. today, that’s around 4.49%… . Which product do you think borrowers will need to take if they are on a tight budget? yes, the 5 year fixed rate mortgage.

So, why do these lenders not want to deal with Mortgage Brokers? For me the answer is very clear…they want to put you into their most profitable product…. Mortgage Brokers have a duty to recommend and advise the MOST APPROPRIATE PRODUCT.

I’ll be speaking more about Bank mortgage products soon… in particular, the split mortgage products… please don’t get into these products without knowing all the details and reading the fine print….speak with a qualified Mortgage Broker.

Bank horror stories might explain their $Billion profits..

I’ve debated whether I should share some of these incredible nightmares with you….but there are just so many of these coming up that I had to report them….If you have a similar story, please send me a note so that I might review and share and maybe even try to help.

Bank Horror Story 1

Last year, I had the pleasure of helping out a young family….. They have 5 kids and were in the wrong mortgage product with a short amortization and the bank had recently given them a consolidation loan to help out…  The banker did not do this family any favours…

Their monthly payments were still totaling around $2900/mth….A simple review would have revealed that this family had plenty of equity in their home to leverage…. After all, the cheapest money is mortgage money.

I recommended they roll that loan into the mortgage, break the current mortgage, extend the amortization and the end result would be a much lower and manageable payment with a lower overall interest rate….3.75% vs 4.94% and their monthly payment would be $1600/mth...saving them over $1300/mth.

The bank quoted a $5k penalty.. that’s ok… it was still well worth it… the interest savings would be around $13k over 5 years… but then they charged him over $10k in penalties at closing...  well, with the help of Ellen Roseman of the The Star newspaper, he got his $5k back…..

Bank Horror Story 2

Here’s another story with a happy ending that just occurred this year… A single mother with disabled son needed to get their payments lower and pull out some money for a new roof….Her mortgage was coming up for renewal so no concerns with penalties, right?  WRONG!!

This Bank ( a Big Six bank) decided to renew the mortgage into a closed 6 month term…even though they had been informed by the client that she was paying them out… and informed by her lawyer that they were paying them out….   WHY?  I have no idea….but they ended up charging and collecting a penalty for $1600…

Once again, with the help of Ellen Roseman from The Star, the bank refunded the entire $1600 to that client some 3 months later….   The worst part about this story is that the Branch Manager refused to return any calls to the client or her lawyer…..  Quite Pathetic.

The Big Banks are reporting $Billion quarterly profits

Have you read some of the financial reports from the Big Banks?  Do you know where they are making most of their money?  From Domestic Banking…  The above stories are just 2 examples where clients are being gouged and ripped off….how many more of these situations exist?

RBC first quarter profits $1.5billion…where is the crisis?

RBC posted a $1.5billion dollar profit in quarter one this year….WOW!  It’s good to see Canada’s banking system so strong.. but profits this high during what some called, the worst recession in history, might leave a bad taste in your  mouth…

Last November, a secret meeting between the Big Six Banks executives and Bank of Canada Governor, Mark Carney, took place.. the Banks called for tighter mortgage rules…. The Banks were concerned about rising debt levels…

Three months later, we have the new rules… but why all the concern when all the banks are reporting healthy profits?  Arrears and defaults don’t seem to be an issue…

There must be a concern about loan defaults in the future… and yet the Minister of Finance repeatedly keeps saying he sees no evidence of a housing bubble…. Makes you wonder?

…..we’ll be discussing this further in future postings…

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