Why Banks Aren't Always the Best Choice...

Why Canadian Banks Aren't Always the Best Choice for Your Mortgage

The financial landscape is in constant flux, and recent years have shown a notable shift in how Canadians view their relationship with traditional banks. The days of banks being an all-encompassing, unquestionable "safe haven" for your finances are fading. Why? A consistent and growing pattern of class action lawsuits and large-scale settlements is bringing their practices under a microscope.

While your bank may be your first thought for a mortgage, it’s crucial to understand their business model. Unlike a dedicated mortgage professional, a bank is a behemoth with multiple lines of business—investing, retail banking, credit cards, and more. Their primary goal is to maximize their own profitability, not necessarily to find the single best deal for you from the entire market.

Here are some recent and past examples of banks being held accountable, illustrating a larger trend:

• TD Bank: In addition to the well-publicized $1.2 billion US settlement over its alleged role in a Ponzi scheme, TD Asset Management Inc. recently agreed to an $8.5 million CAD class-action settlement. This was to resolve claims related to "trailing commissions," where the bank allegedly paid fees to discount brokers who provided no financial advice to clients, a practice that ultimately diminished the value of their mutual fund investments. There was a second, related settlement with TD Asset Management Inc. for $70.25 million, on behalf of investors who held TD mutual funds through discount brokers. This is a separate case from the $8.5 million settlement for those who held the mutual funds with a financial advisor.

  
  

• CIBC: CIBC has faced multiple legal challenges. A $26 million settlement was reached to resolve a class action challenging trailing commissions paid to discount brokers, a parallel issue to the TD case. This follows an earlier $153 million settlement for unpaid overtime to employees, and a $73 million settlement from a few years prior related to control and supervision inadequacies.

  
  

• BMO: In a US-based case, BMO's subsidiary was found liable for "aiding and abetting breach of fiduciary duty." Furthermore, BMO Capital Markets was recently ordered to pay over $40 million US in an SEC settlement for allegedly failing to supervise employees who used misleading metrics to sell mortgage-backed bonds. BMO also had a significant data incident class-action settlement, where clients were compensated for time spent addressing personal information breaches.

  
  

• RBC: RBC agreed to a $31 million US settlement with the Department of Justice over allegations of discrimination, specifically for "redlining"—a practice of limiting mortgage lending in predominantly Black and Latino communities. More recently, RBC has also reached a $7.05 million settlement in Canada for a class action regarding "duplicative NSF fees," where multiple fees were charged for a single attempted transaction.

This trend is not an accident. It's a clear signal that banks' broad and often conflicting business interests can lead to practices that may not serve the client's best interests. This is particularly relevant when it comes to a major financial decision like a mortgage.

A Better Way Forward: The Rise of the Independent Mortgage Broker

As these issues continue to surface, a powerful shift is happening. An increasing number of Canadians are bypassing their banks and turning to independent mortgage experts. Data from CMHC and Canada Guarantee shows that in 2024, a staggering 65% of all mortgages were arranged by a broker.

Why this dramatic shift?

A mortgage broker's sole focus is on finding you the right mortgage from a wide range of lenders. They are not beholden to any single institution. They work for you, the client, not the bank.

Here’s what that means for you:

• Access to More Options: Brokers have relationships with over 50 lenders, including major banks, credit unions, and alternative lenders. This gives you a much wider selection of products and rates.

  
  

• Unbiased Advice: A broker’s job is to assess your unique financial situation and find the product that is truly the best fit for your needs, not just what's on their shelf.

  
  

• Personalized Service: As a dedicated mortgage professional, I can provide a level of personalized guidance and expertise that is often difficult to find at a high-volume bank.

  
  

Don't just default to the bank you've always used. The financial stakes are too high. To get transparent advice and a mortgage solution tailored to you, connect with a mortgage broker. It's an important step in protecting your financial well-being.