If you want the very best deal on a big bank mortgage, get ready to sign up for more products, whether you like them or not.

Banks want your business, all of it — your chequing account, credit card, investments, creditor life insurance, auto loan. The whole enchilada. And if you don’t give them more than your mortgage, depending on the bank, you don’t get their lowest mortgage rates.

It’s typical for lenders to factor a client’s other business into their mortgage rates. In fact, this so-called ‘relationship pricing’ is as old as banking itself. But some banks (e.g., Canadian Imperial Bank of Commerce and Bank of Nova Scotia) are extra vocal about pushing multi-product commitments.

At CIBC, for example, “If the (mortgage) economics are not constructive, we look for the clients that understand the kind of relationship we want to build with them, and work with them,” said chief executive Victor Dodig at Tuesday’s Royal Bank of Canada Capital Market’s Canadian Bank CEO Conference.

And by relationship, he means a commitment to giving the bank other non-mortgage business.

Over at Scotiabank: “We’re not going to use the price lever to go after market share,” CEO Scott Thomson said at the same conference. “I’m not that interested in monoline mortgage clients that we can’t drive a primary relationship with.”

Scotiabank’s best rates are typically reserved for customers in its Scotia Mortgage+ bundle program. Due to the pricing advantage, three in four new mortgage customers sign up for other financial services at the bank.

Meanwhile, RBC and Toronto-Dominion Bank, which are locked in a vicious mortgage showdown, have been chasing volume like a kid chasing an ice cream truck. To do it, they’re focusing more on sheer price competition, which is music to consumers’ ears.

“We’re driven first and foremost by volume versus margin,” said RBC CEO David McKay at the conference. In fact, he suggested that RBC’s skinny mortgage margins contributed to “historic lows” in the profitability of its mortgage book.

The bundled rate difference

For those who don’t want other bank products, mortgage rates can sometimes be 10 to 15 basis points higher. On a standard new $500,000 mortgage with 25-year amortization, an additional 15 basis points will cost you roughly $3,500 in interest over a five-year term.

What banks conveniently forget to mention is that competitive rates exist elsewhere without the product-bundling circus act.

That’s a factor for those who prefer full financial freedom and:

a) don’t want to be coaxed into other products they don’t need, and
b) don’t want to be pitched extra products by their bank every month.

Banks now commonly demand customers open a chequing account and have their mortgage payment withdrawn from it to get the best mortgage deals. Banks know that chequing accounts are a gateway into your wallet. This strategy dramatically increases the probability of customers buying other products. It’s also mandatory if you want cash rebates on your mortgage, which banks routinely offer to lure new customers.

However, past research from Rates.ca shows that three-quarters of consumers have been with their bank for more than five years. The majority would consider changing banks if their savings were big enough, but most people say they find switching banks to be a hassle.

If uprooting your financial life sounds as fun as filing your taxes, research other options. Talk to a mortgage broker, call a few banks that are less multi-product focused and scan rate comparison websites. It’s all about getting the lowest overall borrowing cost and the greatest flexibility with the least rigmarole.

Can’t blame the banks

HSBC Canada, which RBC bought last year, took multi-product mortgage discounts to a new level when it rolled out everyday low pricing in 2016. It offered industry-leading low rates on the assumption that it could make back the difference in other product revenue.

Unlike today’s banks, however, HSBC was actually transparent with its mortgage offerings. The Big Six banks are anything but, forcing customers to jump through hoops to get their lowest discretionary rates (a.k.a. “exception” pricing) on mortgages.

Scotiabank is a semi-exception because it advertises rates lower than those of the other Big Six at its eHOME online channel. However, you must log in to see the offers, and you’ll usually find lower-than-advertised rates elsewhere.

In any event, banks are about maximizing shareholder returns, so their product-bundling strategy is as predictable as gravity. Like it or not, this financial arm-twisting for premium mortgage rates will only intensify as time marches on.

(Side note: Bundled pricing is not illegal “tied selling,” whereby the bank won’t approve you unless you buy other products. Qualified single-product clients generally get approved, just at a higher rate.)

And hey, if banks offer promotional pricing on those other products and you can have most of your financial services in one convenient place, that may not be so bad.

One last point: Lenders with nothing else to sell besides mortgages — i.e., no way to subsidize their mortgage rates — face an uphill battle. Some may find themselves in an existential crisis.

If our government and the Department of Finance truly wish to boost mortgage competition and ease financial burdens, they’ll need to ramp up low-cost, low-risk government-backed mortgage securitization. Big bank competitors depend on it. Barring that, deposit-taking institutions will increasingly outprice rival monoline lenders, and consumers will pay.

Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.  

Mortgage rates

The rates displayed below are updated by the end of each day and are sourced from the Canadian Mortgage Rate Survey produced by MortgageLogic.news. Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.

This table reflects the prevailing rates at the time this story was published. For the best mortgage rates in Canada right now, click lowest mortgage rates.