Over the weekend I came across this headline.
It was based on Ratehub.ca’s Digital Money Trends release, which we covered this week. That report yielded some useful new data, as noted. Unfortunately, it dropped the ball in one key claim.
The report attempts to show how much Canadians would have saved by choosing a RateHub rate, versus the banks’ posted rate over the past five years.
In our story Wednesday, we purposely ignored this stat. Comparing savings between discount and posted rates is like telling vacationers how much Expedia would have saved them versus hotel rack rates, or telling car buyers how much TrueCar would have saved them versus MSRP.
For any mortgage company to compare its discounted rates to bank posted rates (which almost no one pays anymore) is, in this author’s view, distorted and disingenuous—to put it politely.
It’s a shame because the report could have compared Ratehub (or any rate comparison site) to average rates, or the bank’s special offer rates, and still made a very valid point. It didn’t have to resort to the 1995 playbook on bank challenger rate marketing. And, by the way, if you’re a broker or lender, neither should you.
Any qualified homeowner who’s spent half an hour researching mortgages online knows that paying posted rates is ludicrous. Even the banks themselves would tell you how uncommon it is for their own borrowers to pay posted rates.
If you want to make a point about how great your rates are, compare them to a reasonable benchmark. MortgageDashboard.ca shows the average broker rates being advertised by Canada’s biggest brokerage firms. Use that, or something more akin to what borrowers actually pay. Don’t discredit yourself by using the “my discounted versus your posted” trick.
Sidebar: Interest rates are only one component of total borrowing cost. This story isn’t meant to imply otherwise. And for full disclosure, let it be known that this author also owns a rate comparison site.