CIBC has cut some sizzle from its popular “Mortgage Switch” campaign.
It has reduced the variable-rate discount to prime – 0.40% (from prime – 0.50%) and eliminated the promotional 3% cash back option on variable mortgages over $400,000.
These changes apply in all of CIBC’s distribution channels (i.e., Mortgage Centre brokers, CIBC branches, and CIBC/Home Loans Canada mortgage professionals).
“We continue to offer the CIBC Mortgage Switch offer which has gained significant traction and helped to attract new clients to CIBC through retail and broker channels,” says CIBC spokesperson, Rob McLeod.
As such, 2% cash back is still available for switches under $400,000 where the customer is taking a Variable Flex Mortgage or a 3, 4, 5, 7, and 10-year fixed-rate mortgage.
3% cash back is still available on fixed mortgages over $400,000.
Prior to this change, CIBC’s effective rate on $400k+ variables was better than prime – 1.1% (if, and only if, you used the cash back to immediately prepay your mortgage). Now, CIBC’s variable-rate with 2% cash back has little mathematical edge over a typical prime – 0.85% variable.
On a $400k+ five-year fixed, it’s a different story. CIBC’s effective rate is below 3.30%, which is exceptional if you’re 100% certain you won’t break your mortgage for five years. (Keep in mind, people refinance five-year terms in roughly 3.5 years on average.)
As we’ve reported before, however, there is a serious potential downside to CIBC’s cash back special. It comes with a 100% clawback of the cash back (in addition to the prepayment penalty) if you break the mortgage even a single day early.
Mind you, you can do an increase and blend and also port the mortgage to a new property. By doing so, you can potentially avoid the brutal clawback.
CIBC’s Switch promotion is accessible through Mortgage Centre Canada, Home Loans Canada, and CIBC Mortgage Advisors. It only applies to applicants closing in 30 days or less. Pre-approvals are not available.
Contact your mortgage professional for complete details.
Rob McLister, CMT
Last modified: April 28, 2014
Phew.. good thing I got in before it was too late! (3% cashback + P-0.5 for 5 years on 500k refi; the $15,000 was immediately plowed into another (higher) interest rate floating rate mortgage I had)
All cash back mortgages end midnight June 30.
The effective rate was actually closer to prime-1.35% if you advanced a mortgage 20% more than required (to get an extra 75 bps of cash back) and immediately paid it back as a lump-sum payment.
Where does the extra 75bp come from? Is this assuming I also prepaid 20% of the principal every year, at the earliest opportunity?
Actually, according to my calculations (correct me if I’m wrong!), for a borrower that prepays the maximum 20% at the beginning of each of the first four years, the effective floating rate is roughly P-0.5-(3/(0.8+0.6+0.4+0.2+0.2)) = P – 1.86% !!! (weighted average for the five year term)
No wonder CIBC cancelled the deal for VRMs!
LH – you’re not serious are you? I pray you aren’t in the mortgage business and advising your clients with this math.
Hi N.O., Do you have a good source for that? Just curious because CIBC corporate said that only the 3% cash back on variables was disappearing…
I’m an end client (I’m in hock for a few mortgages, now almost all floating) and I use this site to educate me on how to get the best possible financing.
My math only works for those who aggressively pay down the mortgage to the max, something that CIBC knows won’t happen for 99% of their lenders out there, and reflects the fact that the $15000 I got was a nice gift, if and only if that money (and other money) is deployed immediately to pay off the loan as fast as possible, and leaving only a small reminder at the end so as to ride out the entire 5Y term (barely).