Peter Aceto on Debt, BMO & Bubbles

Peter-Aceto-INGING Direct Canada CEO Peter Aceto was on BNN Tuesday (video).

Here’s a sampling of his opinions…

On debt…

  • He called the use of credit in this country “disappointing” and a “concern for our economy.”
  • “We are starting to look a little more like our American friends…”
  • On a positive note, “..We’ve seen for the first time in some time, the use of debt beginning to decline.”

On BMO’s 2.99% five-year fixed promo from January…

  • BMO“This is not a big time (of year) for mortgages. So if someone wants to jump the line and try and get some market share, then that’s great.”
  • “The mortgage business probably isn’t going to grow as much this year as it did in the past.”
  • “The problem…with [BMO’s offer], is it teaches exactly the wrong message. It incents Canadians to go after something that looks really good (but isn’t so good).”
  • “It’s the hotel California mortgage. You can check out anytime you like, but you can never leave…The prepayment options are very very low,” and “you have to sell your home or die if you want to get out of that mortgage.”
  • “Canadians need to scrape a little bit deeper before they choose a mortgage…”
  • “You will see” more deep discounting in the spring.

Aceto is naturally right about the limitations of BMO’s “Low-Rate” product. At the same time, customers will welcome BMO with open arms anytime it wants to undercut competitors by 15-20 basis points (like it did in January), restrictions or not.

On housing valuations…

  • “We do talk about it a lot in the office.”
  • “Uncategorically, I would say no, I don’t think we have a bubble like we saw in the U.S.”
  • “…We have some issues….It’s not a national issue. It’s more of a British Columbia issue or an Ontario issue. Prices are very high.”
  • We should have some “pause for concern.”
  • “…The mortgage competition doesn’t do anything to help.”
  • Condo valuations are “pretty high on top of the list of things we are watching very, very closely.”

Rob McLister, CMT

  1. Well in his defense the BMO move REALLY was just a smart PR move by BMO. With all of the restrictions I am willing to bet that only 20% of people interested in the rate/product qualified and/or actually wanted it, especially when many other major lenders followed up with 4 yr rates at 2.99% the next day.

  2. Mortgage consumers have to realize that if it weren’t for ING opening up shop in the mid-90s and offering fully discounted mortgage rates, which was practically unheard of back then, today’s mortgage market would have been far less competitive. By offering mortgages to consumers directly at a significantly lower rate and without any haggling, ING pioneered the discounted mortgage market in Canada. Often imitated but never duplicated, no virtual bank, and there has been a few, some survived while others did not, has managed to carry on and grow like ING did.

  3. I find it a little surprising that a CEO of a major financial institution would describe the credit market as
    “disappointing” and a “concern for our economy.”
    Monetary policy has been stimulative in Canada, the U.S. and elsewhere for good reason. Apparently, it was to aid the recovery from a little incident called, “the near-collapse of the world’s financial system.”
    I would be more concerned if credit levels had not increased under such circumstances.
    If I’m not mistaken, I thought that was the whole point.

  4. A little incident that required $900 billion to stimulate Canada and the US that had domestic returns of about ten cents on the dollar while the other ninety flowed to China.
    The stimulus money has now run its course and there is no incentive to stimulate further; this is due to the failure of the first stimulus. There is no guessing what’s next— Carney already spelled it out for everyone.

  5. BMO’s mortgage obviously isn’t the greatest but it would be refreshing to hear just one competitor say, “Hey, it’s not a good fit for most but it’s the right mortgage for some.” I think Aceto comes across as jealous and defensive, especially when he tries to justify ING’s high rates with extra prepayment privileges. Almost no one needs 25% prepayments. Everyone needs a lower rate.

  6. It’s not so much the prepayment that deterred me, it really is more of the Hotel California analogy that deterred me from that product. While I expect to be in my next house for 10+ years, if something were to change and I had to sell after a year, the only option would be to port the new mortgage to another 4 year posted rate BMO product and cry myself to sleep for 48 months.

  7. More like incredibly lame. 3.49 5yr? No thanks. While I agree that they played an important role in bringing competiveness into the market, they are no longer on the leading edge…

  8. I take issue with anyone who judges others in how they choose to save or spend their money! If I qualify and choose to refinance my house to buy a boat, new kitchen or pay down high interest debt, that’s my business. If Peter’s wife wants to spend $2,000 on a Louis Vuitton purse or plastic surgery, that’s her business.
    “Peter, Save your own damn money”

  9. Even the CEO of competitor ING Direct, Peter Aceto, found it compelling. He told the Toronto Star:
    “If you’re satisfied with everything else, take it, because 2.99 for 5-year money is a great rate…”

    I thought a bona fide arm’s length sale was a legitimate way of breaking the BMO mortgage. And I really don’t see what everyone’s complaining about. There’s closed mortgages and open mortgages. Oops, nobody wants to pony up the rate for an open, so I guess the market’s evolved into a continuum of products in terms of openness, but still people complain. If there’s a non-negligible risk that you’d have to sell before the term is up, maybe rent instead of buying? Or rent the place out for the remainder of the term? With land transfer taxes, realtor fees moving expenses etc., a short move is going to cost a fortune even if you can break your mortgage for free.

  10. As a bank shareholder, I agree completely, as long as the qualification is solid. I want to see a lot of equity at conservative valuations, a government guarantee, or a rewarding interest rate.

  11. It wasn’t necessarily ING that started the ball rolling on discounting but Tom Alton at BMO. It was under his adminstration that discounting topped 1%.

  12. I don’t think ING start the movement, rather President’s Choice did back in 1997. ING has done a good job and uses lots of advertising dollars to make you think they started the movement.

  13. Some of these comments are simply ridiculous. I love the criticism from people that do not support ING. And making personal comments about Peter’s wife? really? If you listen to the entire interview he also discusses openly that ING deals with customers directly as well as Mortgage Brokers. Then we turn around and stab him in the back? huh! ING does not have the same revenue streams as all the other banks. Because ING does not earn fee’s from other revenue streams, they cannot always “buy” the business like other banks. I felt Peter was open and honest. Canada’s debt is at an all time high and people should be concerned about it. Are their rates always the best, no they aren’t. Stop selling rate!

  14. “Stop selling rate!”
    This is the battle cry of a defeated competitor Liz. The horse is out of the barn and will never go back in. Get used to rate competition and lots of it.

  15. To Joe Consumer comments: This is the battle cry of a defeated competitor Liz. The horse is out of the barn and will never go back in. Get used to rate competition and lots of it.
    Ahh, my friend, I am far from a defeated competitor. I focus on the overall package to suit the costumers need. ANYONE can sell rate, not everyone can sell VALUE

  16. ING has cultivated a tremendous brand based on providing savings and flexibility to consumers. It’s not usually the cheapest lender on the street (rate-wise) but it’s standard mortgage features are arguably the best of any national lender. Those who need to max out prepayments or break/refi their mortgage early will often find that ING’s policies yield savings that offset the small rate differential at origination.
    P.S. For full disclosure: ING has been a long-time sponsor of this site, and has allowed us, in part, to make CMT possible in its present form. We are grateful for that support.

  17. ING offered good rates and terms 5 years ago but right now they are well behind the pack.
    Let’s see what ING has to offer…
    Competitive rates? No.
    I contacted ING to see what they can offer if I am to move my mortgage to them. The agent did not want to offer anything better than the rates posted on their web site. That is their business model. Every other lender I contacted offered better rates.
    Collateral charge mortgage? Yes.
    It is not an “unmorgtage” any more.
    I guess it is their new retention policy (welcome to the TD club) so they do not have to give you 4-year fixed at 2.99% at renewal any longer.
    Prepayment privileges?
    Who can afford to prepay 25% every year? Those who can should take a shorter amortization period or a shorter term. 25, 20, or 10% does not really matter to the majority of borrowers.
    25% payment increase is not a lot. TD allows 100%, RBC allows double up payments. You can “increase” regular payments with pretty much any lender by prepaying the principal multiple times.
    Early termination penalties?
    Here I have to give ING a credit. However the First National is in the same boat. But the First National offers much better rates through a broker.
    If you have a good chance of terminating the mortgage term, get a shorter term and “save your money” (c). When the rates are high, get a variable.
    Need more money? Get a line of credit or ride on credit cards with 0% balance transfer offers.

  18. ING’s rates are better if you go through a broker.
    They also have the best lump sum prepayments at 25%. Payment increase options of 100% or “double up” aren’t as valuable because you can’t prepay a lot at one time. By the way, RBC’s lump sum prepayments are the worst of any bank because they only let you prepay once a year.
    I hate that ING imposes collateral charges on people but at least they will reduce your penalty 25% if you break early. That is something no other lender does.

  19. Most people don’t even come close to pre-paying 10% per year so that shouldn’t be made to be such a big issue.
    In regards to the Hotel California comment, it’s not correct, the product allows the client to refinance but limits to being with BMO. If this is a problem for a consumer than they simply don’t take this product. No need to be alarmist about it.

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