Mortgage Jake

Interesting Paragraph.

I found it interesting to read the following paragraph in an article titled “Mortgage War Combatants Losing Taste For Battle”:

BMO is trying to rebuild its market share in the mortgage market, after losing considerable business over the past few years. The bank is employing a strategy of low rates up front, hoping to attract customers who also want to move accounts, while hoping to make bigger margins off customers down the road when they refinance.

The reason why I bolded that part is simple: BMO is hoping to make more money off its customers when they refinance. We know that about 70% of first-time buyers do not make it to the end of their 5-year term (on average they break at the 3.5 year mark). We also know that BMO’s mortgage offer of 2.99% does not allow a client to shop their mortgage around as you can only exit the agreement by selling your home. SO - was this a slip of the tongue by BMO? I surely would not want that strategy to be publicly known!

Oops. Yet another reason why term AND rate are equally important.