Alberta lender ATB Financial has ended its practice of discounting posted rates – welcomed news for brokers who view artificially high rates as confusing for clients.
“That is great news, and certainly it will increase competition,” said Nick L’Ecuyer, principal broker with Verico The Mortgage Wellness Group, “and it will definitely provide clarity on mortgage penalties. A lot of times the discounted rate doesn’t show on the agreement, and I usually have to go back through years of emails to find what it was.”
A major criticism of the big banks has been the inflated posted rates, which create larger differentials between the customer’s rate and current rates. That differential can present IRD penalties much greater than the lender’s actual lost in interest.
“Customers look to their financial institution for guidance, so a customer’s mortgage rate should not be based on their negotiation skills,” said Rob Bennett, executive vice-president of ATB Retail Financial Services. “The way banks post mortgage rates is an unnecessary practice that makes an already stressful consumer decision more complicated.”
The 75-year-old ATB has used posted rates for decades – using the traditional method of posting to recognize loyalty and good clients through rate discounting. However, the inherent complications of discretionary pricing models and interest rate differential calculations can be troublesome, says L’Ecuyer.
“You look at the current rate compared to the penalty rate, and there’s no clarity,” L’Ecuyer told MortgageBrokerNews.ca. “The government is putting in hotlines for clients, but it is still dealing with the complicated posted formula. The posted and discounted rate model can be very arbitrary.”