Our banks have been incredibly slow to embrace the do-it-yourself mortgage movement.
Every lender in the country has the technology to offer fast, affordable and fully automated mortgages online. But they decide against it.
That’s why CIBC’s new digital switch tool caught my eye. I wanted to test the claim that it makes switching mortgages easier, but it also raised a much bigger question:
Are Canadians ready for DIY mortgages?
Today, a single click can buy 100,000 stocks, a website can issue a seven-figure insurance policy, and a multimillion-dollar company can be started online – all without people.
But three decades after the Internet went mainstream, securing a competitive bank mortgage still requires a conversation with a real, breathing being.
“There’s always been a debate about whether customers want to do everything online,” says Lisa Avenia, CIBC’s vice president of real estate-backed lending. “Now we’ve noticed that more and more mortgage customers want digital solutions.”
So far, Canada’s fourth-largest lender is taking only small steps towards online mortgages
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Which, if you think about it, is very slow because babies have trouble walking.
Part of the delay in automation is due to the same reason that is doing the rounds at other banks. According to Avenia, CIBC simply isn’t seeing “much demand” for “full” digital mortgages yet.
It’s probably just a matter of time as our comfort with instant AI answers increases every year. However, currently, research suggests that most Canadians still want a human voice in the room, or at least on the phone or video conference, before completing their application.
One reason for this is the distrust of bot-generated mortgage recommendations due to AI hallucinations, lack of personalization, lack of accountability, and perceptions of outdated data and biases.
But here’s the thing. While CIBC data shows 48 per cent of borrowers need assistance from a mortgage advisor when renewing, a recent Cotality survey found that only 30 per cent of Canadians would pay a premium for a human expert to double-check AI’s mortgage or property recommendations.
This is how CIBC’s Switch Quoter works
After a quick online application and a gentle callback from the credit reporting agency (which doesn’t negatively impact your score), a customer immediately receives an “exclusive digital rate” offer via email – no phone call or branch visit required.
“Previously, a customer might have started by visiting a banking center or contacting a mortgage advisor,” says Avenia.
If the offer seems appealing, customers can lock in the plan for five days, giving them time to complete the full application.
Since you’re not required to keep interest rates, CIBC’s interest rate lock-in serves as a handy insurance policy if you’re in a hurry to secure something because interest rates are rising.
“Most other financial institutions require you to speak to an advisor before getting a quote,” explains Avenia.
What about the tariffs?
This has long been the wall that banks keep running into.
Scotiabank’s automated eHOME mortgage got off to a promising start in 2019. Prices were among the best in Canada.
Then the bank apparently decided it didn’t want to cannibalize its other sales channels and allowed the platform to wither with uncompetitive offers.
CIBC is also off to a strong start with its digital switch tool.
The example I was given involved a three-year fixed rate of 4.29 percent, which was just 10 basis points above the lowest nationally advertised noninsurance rate and well below the advertised rates of all other major banks. (Rates are constantly changing and depend on your qualifications, assets, etc., so your mileage may vary.)
Additionally, like most banks, CIBC offers a cash incentive for switching – from $1,000 to $5,500, depending on the size of your mortgage.
That’s an additional 17 basis points off the interest rate on a three-year, $300,000 mortgage.
From there, customers can contact a mortgage advisor to negotiate further or seek advice.
Customer wealth, creditworthiness and depth of relationship potential all play a role in the interest rate the bank can offer, says Avenia. “Someone who has very strong credit may not be in the lowest interest rate bracket,” she adds.
The race for the killer app
CIBC’s first attempt is respectable, but as with most online mortgage offerings, there is still a long way to go before I would call it world class.
At least six things could improve it and increase its long-term adoption.
1. Consistently competitive pricing:
It’s too early to tell how consistent CIBC will be, but this single factor is the Achilles heel of all big bank digital mortgages. Customers are not fools. You can make an online comparison in just a few minutes. And AI will only make that easier. As a result, banks that try to protect their legacy distribution channels with poor online rates will pay the price in the long run.
2. Refinancing with one click:
After the loan estimate, existing bank customers with verifiable income should be able to submit an application with one click. (Mind you, the bank already offers one-click extensions for existing mortgage holders who are nearing maturity.)
3. AI Voice Chat Advisor:
Imagine a digital mortgage expert who speaks like a real advisor, knows 1,000+ human advisors combined, and guides you through term selection based on your five-year plan, qualifications, risk tolerance, income stability, liquidity needs, market-implied interest rate outlook, yield curve, and more.
4. One-Click Chat Access:
Every lender in Canada should already be offering instant access to experienced mortgage advisors via live chat.
5. An automated property valuation:
Knowing the approximate value of your home will make it easier to quantify the refinance potential. Automated assessments could be subject to a full assessment and allow for a higher loan amount if necessary.
6. Custom Package Pricing:
Customers should have a simple and straightforward way to signal which assets they would be interested in transferring or which additional products they would be interested in in exchange for a lower interest rate. (Banks don’t just want your mortgage – the anchor product. They are obsessed with “depth of wallet” and “cross-selling” helps them offer lower mortgage rates.)
Any bank could have offered these features years ago. Most have made a conscious decision not to offer such options to Canadian borrowers.
Regardless, there’s a lot to admire in CIBC’s new online offering. Hopefully the team knows what’s at stake if they manipulate digital mortgages the way Scotiabank did with eHOME.
Of course, competing lenders and mortgage brokers won’t be taking a break from digital adoption. They’ll be working on their own killer apps, including some that compare products from multiple lenders, not just one brand. So CIBC and its colleagues still have a lot of work to do.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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