A Paradoxical Rate Policy

I recently came upon a puzzling rate policy from a local credit union.

Its website advertises:

“You do not need the stress of shopping for mortgage rates! [We], your community credit union, will now MATCH the rate you are offered!”

Say what?

How does “matching” a competitor’s rate help someone avoid rate shopping?

You’ve got to hand it to a lender who can convince someone who doesn’t like rate shopping to go out and rate shop, and then come back to give that lender the honour of matching someone else’s better rate.

But this little old credit union isn’t alone in employing that strategy. Major banks and some brokers do it all the time.

Banker training 101 teaches mortgage specialists to convince you, the consumer, to return like a homing pigeon if you find a better deal elsewhere. Those in the business know that the mortgage originator who talks to a client last wins the deal.

But there’s something lazy about making a customer do all the legwork while the lender or broker sits back waiting to match a rate. Or maybe it’s not laziness, but shrewdness. Most bankers and brokers loathe back-and-forth rate negotiations. Rate matching is their answer.

As mortgages become increasingly cutthroat, you can bet your boots that more mortgage providers will promote rate-matching policies. It lets them quote a higher rate than their best rate, while diffusing competitors who undercut. It also gives clients some confidence that they won’t miss out on that “one-in-a-million” chance someone has a better offer.

If you’re giving a lender or broker the privilege of the last word on your rate, shouldn’t you bestow that benefit on the person who was most upfront?

Other things equal, which provider deserves the business?

• Lender/Broker A …who gave you 2.79% with no haggling?
• Lender/Broker B …who quoted 2.99% initially, only to change their tune and match 2.79% when you caught them?

Of course, other things are frequently not equal so you have to do what’s right for your wallet. If ‘Lender/Broker B’ has the better mortgage features, it probably still makes sense to consider them despite their rate-matching shiftiness.

But if you get two quotes for a similar mortgage, he/she who quotes the best deal up front deserves the edge. That raises the odds you’ll work with a trustworthy fiduciary, and keeps you from rewarding non-transparent salespeople.

The Spy