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Thursday, September 1st, 2016

Relationship Pricing Dies a Slow Death – Contact a Vancouver Mortgage Broker

Relationship Pricing Dies a Slow Death

A survey was recently conducted on the more than 400 prime mortgage lenders in Canada. This likely includes your bank or credit union, not your trusted mortgage broker in Vancouver.

Of these 400 or so institutions, more than 60 choose not to show their mortgage rates on their websites. Many others are only willing to show posted rates. Of this subgroup that doesn’t show rates, most utilize a strategy called “relationship pricing”. This is where customers only get low mortgage rates if they also use other financial products the lender provides. These other products might include car loans, credit cards, savings accounts and credit lines.

Because of such a strategy, many customers often have no other choice than to use multiple lack-luster financial products just to have access to low mortgage rates. Low blow on the part of these lenders in our opinion.

As a general rule, people hate this lack of transparency. It’s not a good use of their time. Because of the Internet, and the plethora of information at their fingertips, many consumers have grown tired of such tactics in recent years.

These same consumers also demand simplicity, hate being manipulated, and are very sensitive (and opposed) to cross-selling. Thats why many choose to deal with an independent and honest mortgage broker, instead of banks and credit unions directly.

With this in mind, it seems surprising that many lenders are still trying to confuse and manipulate mortgage clients in order to increase profits. It’s almost like they think people enjoy being confused and not understanding their Vancouver mortgage rates.

So in many cases, building “deep relationships” or a “integrated financial experience”, actually means locking you in and then cross-selling you everything else in the dictionary, instead of helping you with a mortgage. Thankfully, few customers are willing to deal with such tactics these days.

In regard to,”relationships” with banks and credit unions, many like to advertise “relationship pricing” as a system where the customer gets a better rate, as they do more business with the institution. The problem in such a situation is that the onus is on the customer to offer more value to the bank, instead of the other way around. Customers shouldn’t be bending over backwards to get the best mortgage rates in BC when there is so much competition on the lender side.

It shouldn’t be this way.

The reality is, most people don’t owe their lenders very much, besides maybe being honest. For this reason, vendors should be providing a pretty compelling value proposition if they want to earn customers’ other business such as insurance, savings, lines of credit, debt consolidation or investments. Multiple financial products shouldn’t be required to get a decent rate; in this day and age, you can simply call an honest mortgage broker, and hear other transparent and low mortgage rates over the phone.

Now if the financial institution is willing to offer a substantially better rate than the competition, a customer might be willing to listen to their relationship-speak and potential cross-sells. Otherwise, get out of here!

With the exception of the above situation, financial institutions should be showing rates up front, whether they are the best mortgage rates in BC or not.

This allows them to build trust and it makes the customer’s life a whole lot easier. Why should a bank demand loyalty when there is no incentive for loyalty in the first place?

Banks and credit unions promoting rates 2 percentage points higher than the competition are appealing to a pretty small customer base. These customers are likely not prime, don’t use the Internet, or aren’t very savvy. Contact a trusted mortgage broker in Vancouver if you want an honest opinion about what lending institution to borrow from.

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