It’s not often that a change in rates makes a company skyrocket to headlines of the next morning paper, but when it does, those companies are most likely among the following. CIBC, RBC, TD, BMO, the National Bank of Canada, and Scotia bank. Yes, the big six. The banks that essentially run the real estate market, and who you really shouldn’t still be with. For those in the know, and who are well aware of the fine print details that are so often hidden from the general public, it’s becoming incredibly clear that these banks should no longer be super powers. Citizens are with them simply out of a lack of knowledge, and immeasurable complacency. Time’s have changed, and it’s time for your decisions to change as well.
Last month, RBC released details on their 5 year fixed-term mortgage plans, which include rates from 0.15 percentage points to 3.74 percentage points (also known as basis points). Unsurprisingly, the news was covered by every major news outlet that Canada has to offer. What’s ridiculous about all of this is that it shouldn’t matter, simply because this shouldn’t be where your attention is supposed to be. At least, it’s not where you should want it to be.
It’s common knowledge that when a Canadian needs a bank, they’ll pay attention to the well known companies, such as the big six. This could be out of ignorance, complacency, but also out of false guiding principles. Many think that the big six are the ones to visit simply due to how well known they are. They must have good rates, and reasonable policies, for them to be so successful now shouldn’t they? Wrong.
Not necessarily known to most, but there’s an entire industry of smaller mortgage lenders who rarely, if ever, make headlines. These lenders are often more competitive, and virtually always cheaper then visiting one of the big six. It’s time for a change. Below are a few reasons as to why we think you should drop your big six bank, and head over to one of these smaller, but more affordable lenders.
More often than not, smaller lenders will drop their rates first.
In order to understand why this is significant, it’s vital that you understand just how this works. To put it simply, lenders give you money when you’re looking to buy a home. This is what is known as a mortgage. When the banks borrow money (because they do), they lend it out at much higher rate than what they’re borrowing at. This is how they make their profit.
According to various statistics, lenders were borrowing at rates which began to decline throughout this past fall. In November of 2018, lenders were cost nearly 2.5% due to a five year Canadian government bond. Now, it’s approximately 1.75%. This reflection shows how much the lending market helps influence various things among mortgages, such as fixed rates. However, it’s only recently been reporting that the big six are sharing these savings with their Canadian customers and consumers.
Rates are typically lower to begin with when utilizing a smaller lender or broker.
Even when putting all of the above aside, it still makes absolutely zero sense to stay with the big six. Frankly, small lenders and brokers have lower rates right at the beginning, which the big six certainly do not. These rates are far better than what you’ll find coming from the larger banks, and it serves to show just how much staying with a large big six bank will cost you.
Frankly, after doing the math, it’s become apparent that you can save $134 a month, just by switching to one of these smaller lenders. That’s an overall savings amount of $40,200. If that doesn’t convince you to ditch your money hungry, big six bank, I don’t know what will.
To put everything into perspective, consider the following. When you’re looking to go on vacation, or looking for a hotel to stay in, you consider all the different prices correct? So why not do the same with your banking? The next time you go to take out a mortgage, shop around. Consider all the prices available to you, and then make your decision. There’s no reason to stay with a big six bank, so why not start now? Ditch the money hungry bankers, and join the real, family friendly small lenders and brokers who have your best interest at heart. Start today, save money tomorrow. It’s as easy as that.