Bank Loyalty Means Paying More?By Caitlin in Mortgage
CanadianMortgageTrends.com just recently released an article entitled “Be Loyal & Don’t Shop: A Recipe for Overpaying” and I have to say: they are right on the money with this one!
This might appear as shocking to many shoppers, and rightfully so. Most people feel that they should be rewarded for their loyalty. You would think that the same bank you visit every week would be more than happy to fight to keep you as a customer. Who would have thought the opposite to be true?
The problem is that as soon as an individual wants to borrow money they contact their main bank as opposed to shopping around.
On the flip side, usually when people shop for a car they look around to find the right fit between comfort, quality and price. For whatever the reason, the same mentality isn’t applied to financial products – and it’s hurting a lot of individuals.
Let’s take a look at the facts. A paper written by Jason Allen for the Bank of Canada has shown that:
– on average, non-shoppers are paying over 4% markup on the products they apply for, while shoppers pay anywhere from 0 to only 1.9%.
– on average, loyal customers are paying up to 9 bps (basis points) above the rate paid by rate shoppers or switches.
These findings demonstrate that not exercising your right to shop for a better rate will likely result in paying more than you would had you shopped.
But what can you do if you don’t have time to shop?
It’s true, many people don’t have time to shop for the best mortgage or financial products. Not only that, the whole process is a bit of a drag. You have to go from bank to bank, contact alternative financing institutions and so on and so forth. The truth is that the process is long and tedious — although the results are great. However, you’re forgetting something: you don’t need to do the shopping yourself – just hire a mortgage broker!
A mortgage broker does the shopping for you and does not charge you for his or her services. See, mortgage brokers are paid commission by the bank, so its in their best interest to make sure they do a good job for you. That means that you get to save on both time and money! For other reasons why you should be using a mortgage broker to find financing, click here.
Don’t let your bank get the better of you.