Bundled pricing: How the best mortgage rates increasingly come with strings attached

In Canada, securing the most attractive mortgage rates from major banks often requires customers to commit to additional financial products, a practice known as 'relationship pricing.' Banks such as the Canadian Imperial Bank of Commerce (CIBC) and Scotiabank emphasize the importance of multi-product relationships, encouraging clients to consolidate services like chequing accounts, credit cards, and investments under one institution.

This strategy means that customers who prefer to keep their financial products separate or choose not to bundle services may face higher mortgage rates. Specifically, these individuals might encounter rates that are 10 to 15 basis points higher than those offered to clients with bundled services, leading to increased costs over the duration of the mortgage.

The competitive nature of the Canadian banking sector further influences this trend. Royal Bank of Canada (RBC) CEO Dave McKay noted that while the U.S. banking industry has managed to pass higher costs onto borrowers, Canadian banks have absorbed these costs due to intense competition. This environment has prompted banks to be more selective, focusing on clients who are open to comprehensive, multi-product relationships.

For consumers, this bundling requirement can present challenges. Those unwilling or unable to consolidate their financial services with a single bank may find themselves paying more for their mortgages. Additionally, switching banks to secure better rates can be a cumbersome process, potentially deterring customers from seeking more favorable terms.

Despite these hurdles, there are strategies consumers can employ to navigate this landscape. Exploring options through mortgage brokers or utilizing rate comparison websites can provide access to competitive rates without the necessity of bundling multiple products. These resources can help individuals identify lenders offering favorable terms that align with their specific financial needs.

In summary, while bundled pricing can offer benefits for some, it's essential for consumers to assess their own financial situations and preferences. Understanding the implications of relationship pricing and exploring various avenues for securing mortgage rates can empower individuals to make informed decisions that best suit their circumstances.