BIG FIVE BANKS employees speak out about deplorable sales tactics… and it’s gone viral!

A news story from CBC has gone viral.   The BANK employees are under tremendous pressure to sell YOU products.  They will say and do almost anything, according to the CBC news article.

For those of us working in Financial Services, this is old news.   Stories of high pressures sales and tied selling has been going on for over two decades.   Sales targets were introduced to the retail branch network in the ’90s.  It was the beginning of a new sales culture.  Prior to this, bank tellers and account managers had always worked with a ‘soft sell’ approach.  They were there to help and service your needs.  This was about to change forever.

Your bank teller is now scanning your financial profile to see if they can up sell you some bank product.   Last week, my son and I were in the TD Bank and they informed my son he was preapproved for a TD Visa card..  of course, there was a small annual fee… so we can add to the BANK’s $billion profits!

Now we are seeing Mobile Mortgage Reps working for Banks.  They come to your home or business.  They are paid on a commission basis.   Think about it. How can anyone expect them to be unbiased?   They can only sell you one brand and one range of products.  Are all mortgage products the same?   They can never truly provide neutral advice or recommend other brands.

It will be interesting to see if this issue gets swept under the rug or if it will become a big stink.  The BIG FIVE BANKS rank in the top EIGHT largest corporations in Canada.  And last year, RBC was the first Canadian corporation to report over $10billion in net profit.

Hmm, I wonder how they make all that money, year after year, after year, after year.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

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..

Read the rest of this entry »

More dumb Bank ads.. but they won’t fool us.

Are you watching the Stanley Cup playoffs?  Year of the underdogs…  I’m a huge hockey fan and although my favorite teams are out of it, I’m still watching… and I’m still willing to put up with the commercials… but some of these ads are rubbing me the wrong way.

Like most TV ads, the truth can be exaggerated…  Take the Old Spice commercial…  “I will have big muscles and cool hair”…. have you seen that one?   My son loves it… makes me laugh too….

But when we’re dealing with something more important, like your money and your mortgage, the truth shouldn’t be cryptic….   The ‘BIG SIX BANK’ ads, bother me… I’ll explain. 

A few years ago, during the Olympics, RBC hit us with a commercial that showed a young couple searching for homes.. Their RBC mortgage rep recommended they split their mortgage “part variable and part fixed…  to save money.”  Remember that one?  click here to view it.   I strongly criticized this product and the so-called advice because it didn’t make sense to break up the mortgage…. Fast forward to today…. My criticism was well justified….Anyone that listened to my warnings would have saved money… Anyone that took this RBC product lost out… Clearly, that was NOT the right product to ‘save money’.

This year it’s BMO….We can’t seem to escape these ads.   How does it go again? .. A young couple are shopping for a home, walk through the bedroom and into the closet, when they magically appear in the BMO BLUE ROOM with a BMO Banker…

They want to pay their mortgage faster…   Have no fear, the BMO Banker is here to the rescue with their pearls of wisdom…  The Banker says, “we can help…by restructuring your payments and getting you into a low-rate fixed mortgage, you’ll pay your mortgage off sooner“…  Wow!  That’s GREAT!!   The young couple are excited… Cue the music!!

Now let’s decode this cryptic message…   ‘restructuring your payment’….  What could the Banker possibly mean?   No mystery folks… It means you must increase your payments.  Yes, that’s all it means…There is only one way to pay your mortgage faster…. increase your payments or make at least one lump sum payment annually… click to here to read about the bi-weekly payment myth.

The Banker continues and says ‘…..getting you into a low-rate fixed mortgage, you’ll pay your mortgage off sooner’.   This must be some magical product… it sounds great…!    Uh, no.. guess again.  Let me give you the straight goods…… BMO refers to their NO FRILLS mortgage as their ‘low-rate mortgage’.   That’s quite misleading if you ask me.   So once again I am issuing a STRONG WARNING.    For the record, this is probably the worst mortgage product you could ever take, in my opinion.  It’s just slick marketing…

You can’t pay the mortgage out for 5 years, without selling your home…..meaning you can only refinance with BMO but there is no obligation for BMO to give you the any future discount, let alone the best discount…..you have limited prepayment options…… and let’s not forget, the infamous BIG SIX Bank penalty calculation….we’ve seen how this one has cost borrowers $20k, $30k and even $40k in penalties!.. click here to read more about how BIG SIX Banks calculate penalties.

The Banks have deep pockets and spend hundreds of $$millions on ads…  It’s up to the little guys, like me, to tell it like it is…  Hey, I won’t promise you good looks and cool hair, but I can promise you to tell it like I see it… There are better mortgages available… Better terms, rates, privileges and options and ultimately, these better options will SAVE you money on your mortgage.   That’s our goal… to pay the least amount of money to own our homes.   Don’t get fooled by a flashy low rate… Rate is important but it isn’t everything.   These aren’t opinions, these are facts.  Just do some research or speak with an unbiased professional.  Speak with a Mortgage Broker.

As always, let me know if I can help… and feel free to send this article to someone you think could benefit from it…

Steve Garganis

steve@mortgagenow.ca

416 224 0114

BMO NO FRILLS mortgage 2.99% is back… but please don’t read the fine print…

Ladies and Gentlemen, here’s a quote from Mr. Frank Techar, head of BMO’s domestic retail bank as published in The Financial Post “We believe these products will allow our customers to borrow smartly,”     I couldn’t agree more… After you spend some time reading the product details, you are sure to turn around and run.

BMO’s NO FRILLS mortgage is back…2.99% for 5 yrs fixed and 3.99% for 10 yrs fixed until March 28. Both come with the same restrictions and limitations as before…  We give this product a BIG THUMBS DOWNS!  We recommend you stay away from this type of product.

Even thought I don’t like the product, I do like seeing these product announcements… they create a buzz and get competitors to react.  It’s great for business.

First off, let me say, there are LOWER unadvertised rates out there…you can get another NO FRILLS 5 yr fixed at 2.95% and a REGULAR 10 yr fixed for 3.94%…..Now that I have your attention, I strongly recommend you read the details before making a decision…. mortgages can be complicated.  Don’t make the wrong a decision.. speak with a Mortgage Broker.

What makes this product different from their regular line of mortgages are the restrictions and limitations.  In January, BMO made headlines when they first announced this so-called ‘special offer’.    It’s special alright… READ THE PRODUCT OVERVIEW…  In January, I warned against taking this product…. my warning has been reactivated…. Once you read the fine print, you will realize this product is not suitable for most of us..it’s just a lot of smoke and mirrors trying to get you in the front BMO door..  a good marketing ploy… and I’m sure they’ll gain market share because of it.   But let’s make sure you understand the fine print…

YOU STILL WANT THAT BMO NO FRILLS RATE?

But let’s say you’ve read all the fine print and still want this product… I’ve got news for you…. There are BETTER PRICED NO FRILLS PRODUCTS…. As a Mortgage  Broker I have access to better unadvertised rates…  Only problem is, I don’t have a $500million advertising budget… So I have to rely on providing my clients with good advice…Fortunately, my good advice has served me well and 95% of my business comes from repeat clients and referrals.

MY ADVICE

No Frills products came out around 8 years ago and my advice has been the same.   DON’T TAKE these products.  If you do, chances are you will not come back to me as a satisfied client.  I can kiss your future business and future referrals good-bye.   And I can’t afford to do that.  That’s why you’ll NEVER see me promote or recommend these products.  Yes, I have access to them but I’m going to do everything in my power to steer you clear of them.

WHAT’S AVAILABLE TODAY

Interest rate is probably the most important part of a mortgage but it’s not everything.  Did you know that there are excellent 5 year fixed rate products hovering between 3.19% and 3.29%?   and 10 yr fixed rates of around 3.94%?   Why are these better?  You don’t have to give up your options. You don’t have the restrictions of a NO FRILLS product, like BMO’s ‘low-rate mortgage’.  You have full prepayment privileges.. you can payout the mortgage without having to sell your home.. you can refinance with any lender and not just your original lender… meaning you will be able to negotiate a competitive rate should you need to refinance.  On average, Canadians refinance their mortgage every 3 years… This happens for a number of reasons.. selling their home, debt restructuring, family issues, work issues, etc….  Mortgage penalties charged on these NO FRILLS mortgages can be outrageous… we’ve seen penalties of up to 14, 16 and even 20 months worth of interest…  Don’t put yourself in that situation…

Get all the facts and then make a decision.

BMO announces lower rate IF you take a shorter amortization!

Have you heard the big news?   BMO lowers rate their best discounted 5 year fixed rate to 3.49%  to encourage Canadians to take an amortization 25 years or less.  They claim they want to encourage Canadians to pay their debt off faster…..  Sounds nice and in keeping with the Christmas spirit, doesn’t it?

Ok, before we get all warm-hearted and teary eyed, let’s take a closer look at what this really is.    First, this IS NOT the best discounted fixed rate in the market.   A good Mortgage Broker can get you 3.39% out there with no restrictions on amortization (even lower with some No Frills mortgage products).   We all want to pay our mortgage off faster, but choosing a shorter amortization only limits your future options…   My recommendation to almost all my clients is to take the longest amortization possible……

It’s not that I want you to have a mortgage forever, it’s about having options….  I always take a ‘what if’ approach….   Follow me for a minute…

Let’s say you had a $300,000 mortgage and you took this BMO 3.49% rate,  your payments on a 25 year amortization with be $1496.23/mth.   But if you took a truly discounted mortgage at 3.39% with a 35 year amortization, your minimum payment would be $1216.75/mth.   You could always INCREASE your payment to accelerate your amortization to 25 years or shorter.

Now, let’s say you lost your job, had some unexpected expense come up, or a financial emergency or just needed to lower your payments.   If you chose 25 year amort, then you are stuck with that payment.. if you chose 35 year, then you can always go back to that lower payment…    That’s the flexibility that we want.  It’s not about taking longer to pay, it’s about having the option to reduce your payment if needed.

LET’S NOT FORGET THE BANKS HISTORY WHEN IT COMES TO RATES

In keeping with the Christmas theme, Mr. Potter would be approve the Banks latest strategy.   In case you didn’t know, the 5 year Canada Bond is in record low territory…. hovering at around  1.31%… the 5 year fixed rates are priced from the bonds… the spread is normally around 1.25% to 1.40%… and yet today, the spread is 2.18%…. WOW!  and why?  TO MAXIMIZE PROFITS.   This is has nothing to do with wanting to helps Canadians. 5 year fixed rates should be under 3.00% but they aren’t, because the Banks want to maximize profits.

VARIABLE RATE PRICING IS AT 1990’s LEVEL

Variable rate pricing went from Prime less 0.90%, 3 years ago, to Prime plus 1.00% in during the October 2008 US mortgage crisis, to Prime less 0.75% just six months ago…. to Prime plus 0.20% today.    That’s right, Prime PLUS 0.20%.  Haven’t seen this pricing since the ’90s.  There are no fundamental reasons for this… it’s simply profit taking by the banks.. they are forcing us to take a 5 year fixed rate.   Sure, today’s 5 year fixed rates are at historical lows, so there is very little attention being given… but when rates go up, and they will in a few years, we will start to ask for more competitive products and better options other than a 5 year fixed rate….  (Can you see Mr. Potter’s grin getting larger?).

My advice… think about who your banker works for….and who your Mortgage Broker works for….

More Banks raise their variable rates

BMO has joined RBC in raising their Variable rate mortgage pricing. The Financial Post reports that BMO raised their Variable rate mortgages from Prime 015% to Prime less 0%.

Can you say, ‘we want to force borrowers into the more profitable 5 year fixed rate products’???  That’s right.. The Banks would rather see you in a 4.00% rate vs. a 2.25% rate…  And why not?  They are a business after all.

We have also just received reports from other wholesale lenders that they will raise their pricing as well…  If you were looking at buying a house, refinancing your mortgage or had a mortgage coming up for renewal in the next 4 months, I would suggest you speak with your Mortgage Broker and get some rates locked in…

It’s important to understand, the Bank of Canada is not likely to raise their rate anytime soon.   Bank Prime remains at 3.00%.  We are seeing the Bank Economists tell us they think the economy will remain slow… The Banks do not make as much profit with the low Variable rate mortgages… They want and prefer you to take a 5 year fixed.. these are the most profitable mortgage products for them.

So  the bad news is Lenders will raise their Variable rates slightly, the good news is that we are probably going to continue to enjoy mortgage rates under 3.00% for some time to come…..

Mortgage Fraud statistics are a mystery in Canada

Here is a good article from McLean’s Magazine that talks about more Mortgage Fraud taking place in Mississauga and other parts of Canada.

But before you read any further, just make sure you understand something… during an economic downturn, we will hear and see more crime related reports…. I’m not sure fraud has increased more or if the fraud can no longer hide behind rising house prices and stable employment…

One of the big mysteries is that we don’t know how much mortgage fraud really takes place in Canada.  That’s because no statistics are available…or at least are not made public.

The McLean’s article said the Canadian Bankers Association says they have no stats on mortgage fraud… and CMHC said that ‘it wasn’t able to provide that data prior to the article being published’…..  Come on…  no one has these statistics???  Then how do we know fraud is a problem??   Clearly, the Bank’s obligation is to it’s shareholders… and reporting any type of fraud could affect the value of the shares….discretion is always exercised when talking about taboo subjects like fraud.  Some have suggested it’s an acceptable cost of the mortgage business… after all, there are over $940 billion in outstanding mortgages in Canada.

Earlier this year, we saw a high profile case with BMO filing charges of mortgage fraud naming hundreds of people… the fraud was for $140 million and could cost the bank $30 million in losses.

Then in June, a report came out from the BC govt that slammed RBC and BMO for loose lending practices….  what made this report somewhat funny is that during this same week, RBC received an award for Creditor of  the Year… one of the reasons for winning the aware was that RBC was ‘thinking outside the box’.….  yeah, I guess they were..!

I don’t know if there is any correlation but the Big Six Banks (TD, BMO, CIBC, Scotia, RBC, National Bank) have been on a massive hiring blitz… hiring record number of so-called Mobile Mortgage ‘Specialists’ ….  These banks have doubled and tripled their commissioned sales force in the past few years…. That’s right, COMMISSIONED sales force… Makes you wonder…..

By the way, Bank employed ‘Mortgage Specialists’ are not registered with the Ministry of Finance like Mortgage Brokers are…no license to lose…

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