The title of this article may be a very good question! You might think that banks with whom you do business for several years will give you the best interest rates? Maybe… Maybe not.
A good example: Someone getting a mortgage
To better understand, let’s take an example. A customer who wants to buy a house calls a mortgage dealer and asks her best rates. During the conversation, the customer said that his bank (a major US bank) has secured a rate of 5 years at 5.25%.
It surprised the mortgage dealer because she knows that her bank offers 5.10% for exactly the same product.
Why does this kind of situation can happen when you deal your mortgage?
It may be hard to conceive why this situation can happen when you deal your mortgage, but here is information that can shed light on this paradox. But before to go further, note that every bank is different with regard to its standards, policy and priority towards its customers.
Sometimes, different branches of the same bank act differently. Consequently, it is better not to generalize: all banks do not have the same policy to offer their customers higher rates.
The bank’s objectives
Different motives underlie the fact that banks often offer higher interest rates for mortgage to customers. And we must not forget that the relationship between the bank and the customer is very competitive: banks want to make more revenue and customer want to pay as little as possible for the loan.
One of these motives is that banks have the mandate to make profits for their shareholders. And one important source of profits is by offering loans and mortgage: banks get interest for those services.
Here are the results of a study poll from 2003 about activities related to consumer mortgage financing:
- 63% of first time home buyers and 61% of second home buyers have used their current financial institution to get a mortgage.
- Only 58% of buyers have compared rates on the market.
- Only 51% of buyers have shopped for several offers.
- Only 44% of buyers have contacted several lenders.
As a conclusion, we can say that it is better to be more aware of different mortgage rates and look for different offers before to buy!
That’s all for this article. If you have any comments of experience to share about home mortgage, refinancing or related subjects, please write it right away! You will help a lot of people to get good information and avoid mistakes!
