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National Bank of Canada made headlines last week after it was revealed it had quietly removed borrowers’ ability to “port” their existing mortgage to a new home.
In an exclusive interview with Canadian Mortgage Trends (CMT), Tarek Naguib, VP of Retail Financing Solutions, explained what prompted that decision, and also confirmed that the feature will be reinstated for its mortgage clients by the end of this week.
“It was in the context of the rising-rate environment that we started to see that our practice with mobile mortgages was not optimal. So, we started to look at some of the features we were offering and we compared it to industry standards, and we realized there were some aspects of it that needed to change,” Naguib said. He pointed specifically to the bank’s industry-leading port time of 180 days.
“We recognized that the portable mortgage option is an important solution for our clients. Therefore, at that point, we needed to take a step back,” he said.
Naguib explained that took place back in June. While National Bank has offered mortgage portability for the past 25 years, less than 1% of its clients used the feature last year.
Mortgage portability is a common feature offered by many lenders that allows homeowners to transfer their current loan from one property to another.
This can be appealing to borrowers with a low interest rate, especially in a rising-rate environment, as it allows them to keep their pre-exisitng rate and term. It’s also a way to avoid breaking the existing mortgage, which could result in a prepayment penalty.
Asked about criticism that the bank had not informed clients, Naguib said the decision had been communicated to internal teams as well as to brokers that have access to National Bank products.
“I can’t comment on their internal communication practices, but we did communicate with our contacts at the brokerage houses,” he said.
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