Online Banks Get Frisky

CanadianTire Canadian Tire is leveraging its customers’ “High Interest Savings” deposits to fund aggressively priced variable-rate mortgages.  This morning it dropped to prime – 0.90% on its 5-year closed variable.  Its 5-year fixed is at 4.99%.  Few lenders are advertising rates this juicy.

(If you’d like information on Canadian Tire products, call CTFS direct or drop us an email)

ING, another online bank, isn’t too far behind with a variable at prime – 0.75% and a 4.89% 3-year fixed.  It’s nice to have customer deposits!

Maybe more non-bank mortgage lenders should start offering deposit accounts of their own.  Mortgage planners could really use another competitive variable-rate lender.

In the meantime, if you’re a broker selling variables based on just rate, you’re done.  You won’t compete.  The best way to prosper in the closed variable market is to focus on alternative solutions.

Most online banks offer just basic closed variables.  A lot of homeowners asking for vanilla variables don’t know what else exists.  There’s actually a world of alternatives out there:  open variables, readvanceable variables, all-in-one variables, front-weighted variables, etc.  Our job as planners is to educate consumers about them, and explain their benefits if applicable.

Of course, professional mortgage planners never:

1)  Push an inferior rate/product if the client can be better served by a lender that doesn’t pay brokers;

2)  Suggest alternatives, like those above, if the client doesn’t need them.

Our industry is based on doing what’s best for our customers.  Those who don’t share that philosophy will be weeded out in due course. 

Indeed, Canada’s mortgage planning industry has evolved over the years with a genuine and recognized focus on ethics.  For that reason, our broker industry is as customer-centric as any in the world.

In any event, back on topic, it might seem like non-bank lenders have forsaken mortgage planners in the variable-rate arena.  That’s not the case.  Margins with variable-rate business are just really tight right now.  The non-banks will be back though.  “Prime – BA spreads” (which influence variable rates) are slowly improving, and the U.S. subprime garbage won’t last forever.

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