Buy more and save? Not with mortgages

The last time you were at a major retailer or supermarket, the check-out clerk probably asked for your points card. If you didn’t have one, they offered to sign you up. Loyal customers are rewarded, you were told.

By Staff | May 14, 2013 | Last updated on May 14, 2013

1 min read

The last time you were at a major retailer or supermarket, the check-out clerk probably asked for your points card. If you didn’t have one, he offered to sign you up. Repeat customers are rewarded, you were told.

Read: Say goodbye to mortgage wars

This is often true, but not with mortgages, the Toronto Star reports. Drawing on a Bank of Canada working paper, the report explains that “existing customers assume they will automatically get a better deal because they’re loyal, but don’t….[P]eople who switch banks get a better deal…because new customers offer the banks an opportunity to sell more products.”

The report also notes that mortgage brokers dig up the best rates, thanks to intense competition. “[O]n average, borrowers that use a broker pay less on their mortgage than borrowers who do not,” the working paper says.