It wouldn’t be spring without reading something in the news about how hot the housing markets are. What we didn’t expect, however, was for there to be so many heated headlines about what’s happening with Canadian mortgages, credit cards and bank accounts. From collateral mortgage drama to ever-increasing banking fees, here’s what made the news:
We’ve written about collateral mortgages many times before. As a reminder, they are readvanceable mortgage products, meaning that your lender could extend more money to you without you having to refinance your mortgage. That might sound good, if you think you’ll need to borrow money in the future, but the way lenders do this is by applying a “collateral charge” – and it comes with two serious downsides. First, getting a loan with a collateral charge makes it look like you have more debt than you actually do; that’s because your lender registered your loan at up to 125% of the value you actually needed to borrow to buy your home (so you can borrow from that extra amount later).
The bigger problem, however, is that they cannot be transferred to other lenders – not even when your term is up – without the help (and cost) of a real estate lawyer. As it stands, both TD and Tangerine only offer collateral mortgages, but neither is transparent about that with their customers. Last month, an undercover journalist made two attempts to get a mortgage from TD and found neither rep was forthcoming about the collateral charge. There’s nothing wrong with the mortgage product itself, especially if you can access it with a low mortgage rate; but shouldn’t lenders have to give borrowers all the details about the products they use? That’s what CBC thinks…
A recent survey by Nielson for CIBC found that 57% of Canadians would choose fixed rate mortgages today, rather than risk getting a variable rate, which could go up or down with any changes to a bank’s Prime rate. Compare that to 48% in 2014 and 39% in 2011, and it looks like more and more Canadians want to go fixed. Are you surprised by that? We’re not. Of course, since the Bank of Canada lowered its overnight rate by 0.25% and bank’s Prime rates then dropped by 0.15%, variable rates are lower than ever. But since no one can seem to agree on whether rates will go up or down, and when, it makes sense that more people are opting to choose the certainty that comes with a fixed rate.
For months, we’ve been following (and waiting) for the federal government to finally announce that they are going to make credit card companies lower the fees merchants pay them whenever they accept a credit card payment – and now, it’s finally happened. As of two weeks ago, merchant fees have been slashed by 10%. Why should you care? The hope is that, as a result of these new lower fees, retailers will be able to lower prices on their products and services. Whether or not this will actually happen isn’t certain, but if merchants are saving money, passing some of that savings onto their customers is a great way to build trust and brand loyalty. Either way, it’s big news for merchants – congratulations to you!
This scam has apparently been going on since January, but as a Marriott Rewards Premier Visa cardholder who actually got the call, I can tell you: it’s still happening. Last week, a 1-800 # popped up on my screen and the voice on the other end told me Marriott wanted to give me one free night’s stay. Fortunately, I had read about this particular scam, and the recorded voice sounded pretty sketchy. But because I only recently signed up for the card, and it does come with one free night’s stay, I understood why people might fall for it. If you aren’t a Marriott Visa cardholder and you get this call, it should seem sketchy – hang up. But if you did recently sign up for this card, know that you shouldn’t be receiving this call. Your free night’s stay will be given to you right away in the form of an extra 20,000 points – hang up!
At a time when banks are already being scrutinized for the sizeable profits they make, it seems odd that they would roll out more account fee + transaction fee increases – something that seems to be happening on an annual basis. RBC’s new fees made headlines last month and include: increased debit transaction fees and “senior” account benefits being pushed back from those who are age 60+ to now those who are 65+.
As of May 1st, BMO also made a number of changes, including bumping the additional debit transaction fee from $1 to $1.25. And TD quietly made some similar changes effective April 1st. Experts say the moves aren’t routine – banks don’t usually push yearly increases the way utilities companies do. And as a customer of any of the big banks, you have every right to be annoyed. RBC generated $1.5 billion in account fees in 2014, and yet daily banking costs still continue to go up. When is enough enough?