Employee Pricing for all customers

One of Canada’s largest Banks, the Royal Bank (RBC) has brought back its “employee pricing”. I keep hearing about it on the radio.

The employee pricing promotion is on until July 3. They are competing in the mass media news with Bank of Montreal (BMO) who made splashes earlier last month spraying our television screens with colour advertisements bragging about their “lowest advertised rate in history” at 2.79% for a 5 year fixed “no frills mortgage”.

They did not of course go into the fine print, which their no frills mortgage is loaded with. But that is for a different blog post, and a different time!

The truth is the big banks have a substantial advertising budget, a budget that small business owners such as myself will never have. They are sinking thousands of dollars into the common message with the intent of getting consumers to focus on one single aspect of a mortgage, and that is the rate. Some people may argue that price is the most important thing to consider.

And the truth is that many clients will be swayed by the bank’s larger than life identity and recognition alone, despite all the “Smoke and Mirrors”.

The truth is, that the interest rate does not necessarily equal the price, especially when looking at the big picture of the cost of a mortgage. By making it all about the rate, and getting people to believe that rate equals price, the focus is shifted from what every single home buyer needing a mortgage should be most concerned with, and that is the big picture and overall cost of their financing. The truth is that the best rate does not necessarily mean the cheapest mortgage.

What’s even more amazing is that a customer can easily do better than BMO’s lowest advertised rate in history, and RBC Employee priced mortgage rates. There are two different lenders at the time of this writing that are offering 2.59% for 5 years. Now of course not everyone hears about these deals because there aren’t any flashy ads on TV or the radio, and nobody is shouting off the rooftops about these deals.

Even more so than the rate though, these products with these lenders offer far better options and flexibility than BMO and RBC. In the long run, this could translate into even more savings on the cost of your financing.

So, if the interest rates are better, and the products are more flexible, then why would you consider going to a bank on your own, instead of coming to see an independent mortgage broker?

Did you know that virtually all of the big 5 banks in Canada make at least $2 billion dollars per quarter…..that is per quarter  not year?

How do you think the banks make their money?

Studies show that 69% of people who take a 5 year mortgage end up making changes to their mortgage before their 5 years are up.

Studies also show that mortgage pre-payment penalty calculations are upwards of 3-4 times higher among the big 5.

So, if the mortgage rates are lower, the options are better, then why would you go and get a mortgage from these guys?

Don’t fall victim to the noise and let your eyes glaze over with the pretty pictures and slick advertising.