Why you shouldn’t be loyal to your bank - Macleans.ca

Why you shouldn’t be loyal to your bank


When it comes to your relationship with your bank, you should be flirtatious. That’s the takeaway from a recent report by the Bank of Canada, which concludes that “loyal consumers pay more” when negotiating a mortgage rate with their bank. If you have three or more products with the same bank (such as a bank account, credit card and insurance), the bank “interprets your loyalty as reason to believe you are less likely to shop around, making you less price sensitive,” writes RateHub, a Toronto real estate startup that noticed the report.

The Bank of Canada’s study found that new clients receive a rate discount of 0.1 per cent more than existing clients. Based on the average value of Canadian homes on the market, which is currently around $370,000, that translates into savings of about $6,000 on a 25-year mortgage at a 4 per cent rate. It’s a substantial price to pay for loyalty.


Why you shouldn’t be loyal to your bank

  1. This advice applies equally to your cable television provider, your telephone provider, and your political party, for what it’s worth.

    • Also applies to relationships with the opposite sex. Substitute “children” for “products”, etc.

      • I suppose one could take a transactional perspective on interpersonal relationships and calculate some sort of net benefit, relationship productivity, and offspring efficiency coefficient, but that’s never turned out well for me.

        I’d argue that it’s healthy to be loyal in your relationships to the opposite sex, but each to his or her own.

    • I can’t think of product but there is profound ad on tv now that highlights this. Commercial I am thinking of is two kids, one adult, and one kid gets ice cream cone or suchlike and the other kid doesn’t. Other kid told he isn’t ‘new new’ or something like that. Teaches people take others for granted and don’t let yourself be used.

      • Ally Bank. Same people who brought you the “Egg Management Fee” meme.

        • Thank you!!! Could not remember name of company. My sister is using those commercials to teach life lessons to my niece and nephew.

  2. Everyone repeat after me: “The Bank is not your friend.”

    Best financial advice I was ever given, right after “never assume”,

  3. Based on the average value of Canadian homes on the market, which is currently around $370,000 …. ”

    370 grand seems awfully high to me. Is there a glut of homes in Van and Tor or something?

    • National average $366,000
      National average (excluding Vancouver):$327,000

    • It’s not just Toronto and Vancouver; the single-family detached house down the street from me, in Ottawa, was abandoned for 4 years and sold for $360K. This house was less than 1500 square feet and built in the 1950’s. The buyer said they were planning on tearing it down and using the oversize lot to build a new house. They spent over $4000 on dumpster fees (at least 15 truck-sized dumpsters) cleaning out the waist-deep junk that the previous deceased packrat owner had left.

      Low interest rates and 20 years of rising prices have made people go absolutely bonkers.

    • Location, location, location.

      Ottawa is company town, must be most artificial market in Canada.

      I am in Guelph, have friends looking at two-story 3-bed/two bath large yard home for less than $300,000 and we are not far from Toronto.

      Thank you, David_Nicholson. If I was a betting man, and I am, I would have guessed average price of home in Canada somewhere near $260,000.

      • http://www.crea.ca/public/news_stats/statistics.htm

        And yes, the location is reasonable, but it’s not Downtown by any stretch of the imagination. The average price in Ottawa has jumped $100K in the past four years.

        I’m intending on returning to Guelph in the next 12-18 months myself. My wife keeps looking at MLS and kicking me in the butt. “Look what we could buy there!”

        • “The average price in Ottawa has jumped $100K in the past four years.”

          Really? That’s crazy. What causing increase?

          I like Guelph. Went to university here two decades ago and returned fifteen years later because of its charm.

          • I think it’s actually only increased $85K, now that I think about it, but still significant.

            It can be primarily attributed to our smaller, more efficient federal government. Federal government employment bottomed out at 326,500 in 1999, and since has increased to 420,574 in 2011.

            Of course, that’s not all in Ottawa. In Ottawa and Gatineau alone, employment has only increased by about 40K people from 1999 (93,801) to 2010 (133,994). However, wages paid to Ottawa employees have doubled (unadjusted) in those ten years, from $512 million in 1999 to over $1.1 billion in 2009.

            2008 to 2009 was the big increase, of course, which probably had to do with stimulus spending. I can’t explain it. In 2008 total Ottawa-area federal government compensation went from $689 million to $1.1 billion in 2009. You can look it up yourself from the associated CANSIM table, 183-0003. If you don’t have access to CANSIM, you can pretend you’re a student and grab it from E-STAT. http://www.statcan.gc.ca/estat/licence-eng.htm

            EDIT: and I lived in Guelph for a few years, also for school, which is the main reason it holds such a strong place in my heart and I intend on returning.

          • I figured it was way overpaid public servants who were making house prices increase so much. Was trying to not think about it, do my blood pressure some good.

  4. Of course, if your bank is Goldman Sachs you should probably be looking over your shoulder.


    The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma. Their unusually scathing bipartisan report also includes case studies of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — “a million fraud cases a year” is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin’s small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street’s aristocratic impunity and prosecutorial immunity produced since the crash of 2008.

    • Matt Taibbi is looking rather brilliant – my favourite, now a classic.

      Great American Bubble Machine
      From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression — and they’re about to do it again

      The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.