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 email@example.com
RBC reported a record $7.5billion profit in 2012. That was up by 17% from 2011. Not bad. In fact, all the BIG SIX BANKs had a great 2012… with a combined record profit of 30 billion!. There’s nothing wrong with profit. All businesses should expect to make a reasonable profit. And a healthy and profitable banking system is important for Canadians. Our Banks are so big that 5 of the top 8 most profitable corporations are now Banks.
But when is it enough? And how far will the BIG SIX BANKs go to increase their profits? Would you believe that Canadian Banks could or would outsource work to foreign countries to save a buck?! CBC News reports that RBC is terminating 45 IT systems support jobs and replacing them with foreign workers. iGATE corp. is an outsourcing corp from India with over 27,000 employees, according to their website. Continue reading “RBC accused of terminating Canadian workers in place of cheaper, foreign labor.”
March 29th, 2012 is going to be remembered as the day when the BIG SIX Banks ended their Mortgage War. Well, at least for now. Rates are up around 0.50% at Retail Branches of the BIG SIX Banks. (don’t worry, Mortgage Broker rates haven’t gone up that much and are lower than any of the so-called discounted or special rates advertised by the BIG SIX Banks.)
In what was an unprecedented, public fight for your mortgage, the BIG SIX Banks pulled down their pants and showed how low they can really go with their rates. We saw BMO come out with their 2.99% NO FRILLS mortgage… ( a product we wouldn’t recommend to anyone due to it’s restrictions, limitations and penalty calculations). Unfortunately, too many borrowers don’t look beyond the rate and have signed on for this product.. They will have to deal with the consequences in the years to come.
RBC fired back with a pretty good rate of 2.99% for 4 years… It didn’t have the restrictions or limitations but it still had that unfair penalty calculation. RBC also took some public shots at the BMO product, through the media and their own website. It was great to see some real competition take place among our BIG BANKS. There is always a winner in this war. You the borrower.
TD, Scotiabank, National Bank and CIBC all followed with a similar 4 year fixed rate at 2.99%. But they still had that same penalty calculation formula I absolutely don’t like.
“Canadian lenders appear to be extremely slow to pass on changes in the Bank Rate to their customers.” Anyone remember that quote? That’s a direct quote from the Bank of Canada review entitled ‘Competition in the Canadian Mortgage Market’.
Here’s another one from the same report “borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders directly”.
The good news about all this rate war stuff is that we saw even better mortgage products being offered through the Mortgage Broker channel. Remember these quotes the next time you are shopping for a mortgage.
CMHC issued a report that says the economy will expand at a moderate pace over the next few years, as reported in The Spectator. The Bank of Canada should also keep it’s trend setting rate low until mid 2013. This means Variable mortgage and secured lines of credit rates will remain low.
The report also says the average house price in Canada is expected to hit $368,900 this year. But, a closer look at the Greater Toronto Area market shows that house prices are climbing much faster. A lack of supply and a pent up demand, together with record low interest rates are fueling price increases. Reports of homes being sold above asking are popping up outside of Toronto.. including Milton, Georgetown, Oakville, Burlington and Hamilton.
If you’re in the market for a home, my advice would be to not wait til the Spring market. The market is now. Experienced realtors are telling me they have priced a 5% increase in the first 2 months of 2012. Waiting could cost homebuyers $18,000 or more.
FIXED MORTGAGE RATEShave started to climb. Earlier this week we saw RBC and TD pull their special mortgage rate offers… BIG SIX Banks don’t like to compete in the wholesale mortgage market with mortgage brokers… when these 2 banks realized no other BIG SIX bank was offering this rate, they quickly withdrew the offer… read this article... the BIG SIX banks are calling a truce? What does that mean…? Don’t you want your banks to compete? And that last paragraph by BMO’s Frank Techar is priceless.. “We went to 2.99 per cent to draw attention to the benefits of having a mortgage with a maximum amortization of 25 years”. This does make me a laugh a little… BMO’s NO FRILLS mortgage was a way to gain market share and entice borrowers into a restricted and closed mortgage product… Mortgage Brokers already had access to this rate and a NO FRILLS product through another lender… but it’s not a great product and the restrictions are costly…Most brokers will not recommend or even offer this product to their clients.
The ripple effects of this ‘truce’ are that wholesale mortgage rates have started to climb… ING and National Bank have also increased their rates. This could be temporary but if the Greeks get their act together and the U.S. economy starts to improve, we will see rate hikes…. My advice is get your mortgage preapproval now…. These are historical low interest rates… I’m not sure they will be here for much longer.
RBC and TD Canada Trust are raising fixed mortgage rates from 20bps on shorter terms, to 35bps for longer terms…. The new posted 5 year fixed rate is 5.69%…
The so-called ‘special fixed rate’ advertised by Retail Banks is now 4.44% at TD and 4.54% at RBC.… (Of course, Mortgage Brokers have access to even lower rates…)
Three weeks ago, Banks lowered their fixed rates after the Bond market dropped due to the Mid-east turmoil and the Japan Tsunami. Bond yields have gone up from 2.45% on March 16 to 2.77% today. That 32bps increase has prompted the Banks to raise rates. Fixed mortgage rates are affected by Bond Yields.
Variable rates remain unchanged. Not sure what’s best for you? Speak with a qualified Mortgage Broker to get some direction.
No, the hand-cuffs are still on if you took a TD Mortgage recently.. yes, they are still being registered as a collateral charge and not the normal, conventional charge…
But I heard from a good source that TD is working on changing their policies to allow for the transfer-in of collateral mortgages. That would mean that TD would accept collateral mortgages from other financial institutions should new clients wants to bring their mortgage to TD.
But how does this help a TD client that is up for negotiation with their mortgage when TD knows they cannot transfer that mortgage out without having to pay new legal fees to move that mortgage? The borrower loses their leverage to negotiate…it’s really that simple… here’s a great article from Gail Vax-Oxlade telling us what she thinks about TD’s new collateral mortgage. Remember, collateral mortgages are not accepted by other financial institutions for transfers….
This subject isn’t going away… we will see if other Banks will follow TD’s lead and go with a collateral mortgage charge or whether they will accept collateral mortgages for transfers. Stay tuned for more on this major shift in mortgage registration.
And who will pay that extra cost to transfer mortgages in and convert them to TD’s collateral charge? For now, it’s TD picking up the cost, but does anyone really expect that to continue? At some point, that cost will most likely be passed to the consumer.
TD is taking a big risk.. maybe it’s a calculated risk… they certainly have the deep pockets to pay for this.. at least for a little while…. I’m sorry to say it looks like the TD borrower is going to lose out in the end.
A few weeks ago, we heard from a source that TD Canada Trust was making a major change in their Mortgage Lending policy. ALL new mortgages would be registered as a collateral mortgage instead of as a conventional mortgage…. previously, only secured lines of credit were registered as collateral mortgages.
By the way, here is a great article from Gail Vax-Oxlade, a well known personal money manager…..she would never take one of these new mortgages with TD… I think she is right on the money with her comments and analysis. Continue reading “Update on TD Collateral mortgage rules”
The rumors are true…TD Canada Trust will begin registering all mortgages as collateral charges after October 18. (No official release from TD yet but a source inside TD has confirmed this to us).
What does this mean for the consumer? Well, there is some good but mainly it’s bad..…
- a collateral mortgage is normally registered for floating or revolving debt such as a secured line of credit. It allows for the balance to float up or down.
- TD will register a collateral charge for 125% of the loan amount… this will allow the client to come back at a later date and apply to increase their mortgage if needed….
- in theory, it sounds great…no legal fees required in the future if you need to refinance… and easy approval…
BUT HOLD ON…
- a COLLATERAL MORTGAGE is NOT really portable…meaning you cannot transfer to another institution…that’s because no other Bank or Lender is accepting collateral mortgages for transfer… including TD…you will lose some leverage to negotiate the rate when your mortgage matures…
- and if you wanted to increase your mortgage in the future, you would need to reapply for approval…let’s suppose you don’t qualify in the future..not because your situation changed but because the Bank’s lending policy changes…this happens regularly….you would now have to seek out an entirely new 1st mortgage as no other lender would register a 2nd mortgage in behind a collateral first mortgage (at least none that I am aware of)… that could mean penalties, definitely legal fees and other costs….
- It’s obvious that a big reason TD would be doing this is to improve mortgage retention.. this makes it less appealing to leave TD because of the costs….
- BOTTOM LINE…this type of mortgage limits your options..it doesn’t expand them.. you MAY save on legal fees..but that’s not a big enough reason to go with this product..
My advise to anyone looking at a TD mortgage is to be careful…make sure you understand all the terms, conditions, the differences and the limitations…you be the judge… is this a good thing for the client or is it a good thing for the Bank?? Will other Banks follow? Some might say this is like putting handcuffs on the client… I tend to agree…