Bundled pricing: How the best mortgage rates increasingly come with strings attached

financialpost.com:

If you want the very best deal on a big bank mortgage, get ready to sign up for more products, whether you like them or not.

Banks want your business, all of it — your chequing account, credit card, investments, creditor life insurance, auto loan. The whole enchilada. And if you don’t give them more than your mortgage, depending on the bank, you don’t get their lowest mortgage rates.

It’s typical for lenders to factor a client’s other business into their mortgage rates. In fact, this so-called ‘relationship pricing’ is as old as banking itself. But some banks (e.g., Canadian Imperial Bank of Commerce and Bank of Nova Scotia) are extra vocal about pushing multi-product commitments.

At CIBC, for example, “If the (mortgage) economics are not constructive, we look for the clients that understand the kind of relationship we want to build with them, and work with them,” said chief executive Victor Dodig at Tuesday’s Royal Bank of Canada Capital Market’s Canadian Bank CEO Conference.

And by relationship, he means a commitment to giving the bank other non-mortgage business.

Over at Scotiabank: “We’re not going to use the price lever to go after market share,” CEO Scott Thomson said at the same conference. “I’m not that interested in monoline mortgage clients that we can’t drive a primary relationship with.”

Scotiabank’s best rates are typically reserved for customers in its Scotia Mortgage+ bundle program. Due to the pricing advantage, three in four new mortgage customers sign up for other financial services at the bank.

Meanwhile, RBC and Toronto-Dominion Bank, which are locked in a vicious mortgage showdown, have been chasing volume like a kid chasing an ice cream truck. To do it, they’re focusing more on sheer price