A Breakdown of Credit Union Rates

Those in the lending world increasingly acknowledge credit unions as a competitive threat. Mortgage rates are a large reason why. 

“The…big differentiator…for many [credit unions], but not all, is very competitive and transparent pricing on mortgages,” banking analyst David McVay tells The Canadian Press (CP). That compares to some banks’ posted rates, which are as high as 4.99% on five-year terms. 

But the phrase “competitive and transparent” needs defining. Any praise we heap on credit unions should be put in perspective because they are far from created equal.

As of this minute, credit unions advertise five-year rates ranging from as low as 2.84% to as high as 5.69%.

Servus, the country’s second biggest credit union (and the one featured in CP’s story), promotes a 3.39% five-year fixed mortgage. That’s clearly more “transparent” than, say, CIBC’s best advertised rate of 4.99%. But 3.39% isn’t much to crow about. If you can’t even beat the lowest widely advertised Big 6 bank rate (3.24% at RBC), your rates are nothing special.

According to mortgage rate data from RateSpy.com, out of the 209 credit unions that publicly display mortgage rates, only 9% of them (18 in total) are truly competitive. “Competitive” in this context means a five-year fixed rate that a well-qualified home buyer can get from virtually any mortgage broker—i.e., under 3.00%. (Mind you, if you take the average rate that CUs publicize, it is significantly lower than the average Big 6 bank.)

Believe it or not, almost 1 in 4 credit unions still feature only posted rates (4.79% and above). Others display no rates at all. They try to lure in customers with “relationship pricing” (i.e., undisclosed rates based on one’s business with that credit union).

As we’ve written before, opaque “relationship pricing” models make market share gains an uphill battle. Today’s younger Internet-savvy consumers all scan the web for rate deals, and “Call for our best rate” doesn’t attract clicks. 

Conversely, CUs that adopt competitive rate models put up big volume (not surprisingly). Take DUCA, for example. It’s leaving most other CUs in the dust as far as mortgage market share growth. That’s thanks in part to reasonable pricing (2.99% at branches) and an aggressive broker-driven mortgage strategy (with even lower rates).

This chart from McVay and Associates says it all. What’s notable is that DUCA accomplished this share growth by partnering with just five mortgage brokerages, as of the date of this chart (they’re up to eight now).

 


Robert McLister, CMT

  1. Why anybody go to CU for Mortgage ? They have lots of restrictions.
    1) Closed mortgages unless sold .
    2) Can’t be ported outside of province so pay a penalty.
    3) should be living within 20-30 minutes from the nearest branch
    4) Usually higher rates except recent price wars to gain market share. How long they will have the money to continue ?
    5) their 5 % Cash back for DP is not amortized. So huge penalty plus pay back full cash back.

    1. Hey Joe, Thanks for the comment. At this stage, there’s no doubt that borrowers should steer clear of the majority of CUs. But that said, an increasing number of CUs are highly competitive on price and very fair on terms. In fact, all but #2 in your list need to be put in proper context. And even #2 (interprovincial porting) is inconsequential to 95% of the population. Only ~1% of the population moves interprovincially each year, according to TD Economics.

  2. In your chart you have ATB Financial, they are not a Credit Union , they are a Crown Corporation owned by Alberta & do not have the same rules as a Cedit Union.

    1. Thanks for the note. We’re not sure if there was a correction from the original CP story or not. Servus actually emailed us and acknowledged the quote being from Ian Glassford, but I notice that CP attributes it to McVay, so it’s been modified here. Cheers…

  3. JOE “why would anyone go to a CU”
    Blanket dismissal of credit unions as being a poor choice for consumers is ridiculous ( to be polite!).
    Some CU s provide attractive terms to customers who do not meet “normal” rules by (still) applying common sense lending. Some provide incredible, “homey” customer service that we all experienced years ago with other lenders, and some CU s provide excellent rates, and some provide profit sharing that can easily offset any rate disadvantage. But just as most banks dont (always) offer the “best ” rate, CU s overall terms can be very competitive, with a neighbourhood approach to lending rather than using a national matrix of black and white lending criteria.

Your email address will not be published. Required fields are marked *

More Stories
dreaming of home ownership
COVID-19 Stokes Canadian Homebuying Intentions: MPC Report
Copy link