Are the banks doing an incred­i­ble job of retain­ing cus­tomers or are Cana­di­ans just too lazy to shop around when renew­ing their mortgages?

One find­ing of a sur­vey by Canada Mort­gage and Hous­ing Corp. released this week was that 89% of con­sumers renew­ing their mort­gage stay with the same finan­cial insti­tu­tion. And 68% stay when they are doing a refinancing.

“They stay with the lender because of rate and they leave the lender because of ser­vice,” says Pierre Serré, vice-president, insur­ance prod­uct and busi­ness devel­op­ment, with CMHC.

Con­sumers are more aggres­sive shop­pers when they are seek­ing a mort­gage to buy their first home than they are upon renewal. Only 57% of first-time buy­ers took out their mort­gage with their exist­ing finan­cial institution.

Rob McLis­ter, a mort­gage bro­ker and edi­tor of Cana­dian Mort­gage Trends, says the banks are doing more to retain cus­tomers but there is a pretty good chance you won’t get the best deal if you renew automatically.

“Most of the time peo­ple do some rudi­men­tary research before they go back to their lender. Not so long ago peo­ple would just take the renewal let­ter, sign it and send it back. It still hap­pens but not as much any­more,” he says.

Mr. McLis­ter says the banks “are not as stu­pid” now and when they send out renewal rates they have spe­cial offers. The posted rate on a five-year fixed closed mort­gage today is 5.39% but he’ll see clients get offers in the mail as low as 4.04% in a renewal let­ter. The prob­lem is a bro­ker could prob­a­bly get you 3.59% –mean­ing you just left 45 basis points on the table.

On a $250,000 mort­gage at 4.04% paid monthly and amor­tized over 25 years, the monthly pay­ment would be $1,320.48, with the inter­est cost dur­ing a five-year term at $47,014.79. Chop the rate down to 3.59% and the monthly pay­ment drops to $1,260.09 ‚with the inter­est over the five years falling to $41,658.85.

If you were crazy enough, or lazy enough, to take the posted rate, you would pay $1,510.01 monthly for the same mort­gage and your inter­est cost would jump to $63,201.92.

Let’s just say it pays to shop around. So why don’t more peo­ple do it?

There is a per­cep­tion that it’s dif­fi­cult to switch banks, plus it will cost you some money to switch. Yes, it’s a has­sle but for $5,000-plus, count me in. As for the costs, the bank you are switch­ing to will often cover your legal costs. Even if it doesn’t or say you face a dis­charge fee of $300, that’s small price to pay upfront.

Mr. McLis­ter says if you change the terms of your mort­gage and refi­nance, it could cost you as much $700 to switch, some­thing you would have to do if you have a home-equity line of credit or have a col­lat­eral charge on your mortgage.

Elton Ash, regional exec­u­tive vicepres­i­dent with Re/Max of West­ern Canada and a long-time real­tor, says for most peo­ple if the cus­tomer ser­vice is good, they stay.

“Unless the lender has really screwed up, they stay,” says Mr. Ash says. “It’s like real­tors, not all of them charge the same fee. There are lots of dis­coun­ters out there but it’s based on ser­vice lev­els more than costs and fees, if it’s rel­a­tively competitive.”

The banks are more com­pet­i­tive these days for exist­ing cus­tomers. Part of the rea­son is it can cost a finan­cial insti­tu­tion up to 30 basis points to attract a new cus­tomer, so why not just spend the money on retain­ing exist­ing customers?

“We start call­ing cus­tomers in advance to remind them their mort­gage is com­ing up,” says John Turner, direc­tor of mort­gages at Bank of Mon­treal. “It is an increas­ingly com­pet­i­tive mar­ket­place and cus­tomers are shop­ping. It’s in our inter­est to advise the cus­tomer of their options. That could include refi­nanc­ing the mort­gage overall.”

Farhaneh Haque, regional man­ager of mobile mort­gage spe­cial­ists with Toronto-Dominion Bank, says her bank starts call­ing cus­tomers as much as 120 days before renewal to dis­cuss options.

“This all about rela­tion­ships, they are not going to up and leave for a five-basis-point dif­fer­ence,” Ms. Haque says.

She’s right. A 0.05 per­cent­age point is not a great rea­son to sever your rela­tion­ship. But renewal time is a great time to test your rela­tion­ship with your bank and get it to show you some love –or a bet­ter rate.

gmarr@nationalpost.com