When I worked at CIBC, I saw how renewal letters get put together. Nobody’s trying to rip anyone off. It’s just a system. The bank has a portfolio of mortgages coming due, they have a target retention rate, and they have a pricing model that calculates what rate to offer each client based on how likely you are to leave.
That last part is the key. The renewal rate on your letter isn’t the best rate your bank has. It’s the rate they think will keep you without giving away more than they need to.
Here’s what that actually costs you, and how the math works once you start shopping.
The retention math
Banks know that most people will sign their renewal letter without comparing it to anything. Different studies put the number anywhere from 60% to 80% of Canadian mortgage holders. So if you’re a bank with a million dollars of mortgages renewing every month, you can offer your average client a rate that’s 0.3% to 0.5% higher than what you’d offer to retain them if they pushed back. The clients who don’t push back are pure profit on that spread. The clients who do push back, you negotiate with.
It’s not malicious. It’s just pricing. Every business does it. Hotels do it with their rack rate vs. their negotiated rate. Cell phone companies do it with their advertised plan vs. the retention offer you get when you threaten to leave.
The mistake is treating your renewal letter like it’s the final word, instead of an opening bid.
What shopping the market actually means
When people hear “shop around for a mortgage,” they often picture themselves calling five different banks, getting five different quotes, comparing rates on a spreadsheet. That’s not really what it looks like in practice.
What it actually looks like is this. You give me your current mortgage details and your latest pay stub. I run your situation through the lenders I have access to — banks, credit unions, monoline lenders, and a few specialty options depending on your file. Within a day or two, I tell you the three or four best options for your specific situation. You pick one or you stay with your bank. The work happens once.
The reason a broker can do this and you can’t easily do it yourself is access. I have wholesale rate sheets that aren’t published publicly. Big banks have one rate for their walk-in clients and another, lower rate they only release through the broker channel because the broker channel is more competitive. There are also lenders you’ve never heard of — MCAP, First National, Strive — that don’t have branches and only work through brokers. Those are often the most competitive rates in the market.
A real example, with the numbers
Let me use a realistic scenario. A client with a $450,000 mortgage, two years left in a five-year fixed, renewing in November 2026.
Their bank’s renewal offer comes in at 4.79%. The client could push back and probably get the bank down to 4.49%. The best rate I’d shop them across the market might be 4.25%, depending on the day.
Here’s the difference over the next five-year term:
- At 4.79% (the renewal letter), the monthly payment is about $2,565
- At 4.49% (the bank’s actual best rate), it’s about $2,490
- At 4.25% (the market rate), it’s about $2,430
The gap between sleepwalking through the renewal at 4.79% and shopping properly at 4.25% is $135 a month. Over a five-year term, that’s $8,100. That’s a real number, not a rounding error.
The cost to get there isn’t zero, but it’s close. You’d need to pull together your current mortgage statement, a recent pay stub, and spend maybe an hour total between an intro call and signing paperwork at the end.
Why your bank doesn’t volunteer their best rate
This is the part that frustrates people the most when they realize how it works. Why doesn’t the bank just offer you their best rate to begin with?
Because they don’t have to.
The bank’s incentive is to keep you at the highest rate you’ll accept. Your incentive is to pay the lowest rate available to you. Those two incentives don’t line up, and the bank has no obligation to do your work for you.
What the bank does have an obligation to do is honour any competitive offer you bring them, within reason. If you come back with a written quote from another lender, most banks will match or get close to matching. That’s the part most clients don’t realize they have access to. A competitive quote in your hand isn’t a threat — it’s just information that changes what the bank is willing to do.
When staying with your bank is actually the right move
Not everyone should switch lenders. Sometimes the math works out and the bank’s offer, after a small negotiation, is competitive enough that the friction of switching isn’t worth it.
A few situations where staying with your bank is often the right call:
- Small remaining mortgage balance (under $150,000 or so), where the rate difference doesn’t translate to enough dollars to bother
- A bank that offers genuine value beyond rate — flexibility on prepayment, useful banking integration, a long-standing relationship that’s actually been responsive
- A penalty to leave that wipes out the rate savings (this is rare at renewal, but possible mid-term)
The point isn’t to switch lenders for the sake of switching. The point is to know what you’re choosing between. Right now, if you renew with your bank without comparing, you’re choosing without knowing.
What to do this week
If your renewal is in the next 6 to 12 months, the highest-value thing you can do is have a 15-minute conversation with an agent — me or anyone — and find out what the market rate actually is for your situation. The conversation costs you nothing and tells you whether to negotiate harder with your bank, switch lenders, or stay where you are.
If you want to skip the abstract and just see what your numbers look like, book a quick call and we’ll run them.
Alex Jodoin is a Level 1 mortgage agent with Mortgage Alliance, serving clients across Canada except Quebec. He’s been an agent since 2017 and worked previously at CIBC and TD. He lives in Stittsville with his family and coaches soccer at West Ottawa Soccer Club.