Coast Capital raises the bar on mortgage flexibility in Canada

VANCOUVER, Nov. 9 /CNW/ - Coast Capital Savings is setting itself apart in the mortgage market with today's launch of a new product that gives greater flexibility and control to customers, including the highest level of extra payments in Canada, easy access to funds when needed and a new rate option that captures the best features of fixed and variable rates.

Lawrie Ferguson, Coast Capital's chief marketing officer, described the credit union's new You're the Boss^TM Mortgage as one of the most flexible in Canada. She said Coast Capital's goal is to provide simple financial help to customers by getting rid of some of the complexities and limitations of mortgages, given that this is the single largest and longest financial commitment most consumers will ever make.

"Our research revealed that customers feel their financial lives are being controlled by their long-term mortgage debt and they are highly motivated to get out of this debt," said Ferguson. "But financial institutions don't make it easy for them to eliminate their debt, while managing their ongoing financial needs, so our new mortgage product includes flexible payment and withdrawal features designed to place control back in the hands of customers."

Coast Capital's new mortgage product includes the Save and Take^TM Payments feature that allows customers to pay off their mortgages faster without penalty by making prepayments of any amount at any time, up to 30 per cent of the principal of the mortgage annually. No other financial institution in Canada offers this level of prepayment privilege. This is in addition to allowing customers to make scheduled extra payments, up to double of their required payments. The new product also allows customers to skip a monthly payment or equivalent (two bi-weekly or four weekly payments) once a year, with no questions asked.

Ferguson said one of the novel features of the You're the Boss Mortgage is that all the extra payments (any payments above what is required to service the mortgage) can be accessed by customers whenever they need funds, even as it goes towards paying down their mortgage. When mortgage holders sign on to their online banking account, they can see how much money they have available for use through the Save and Take Tracker. Customers can withdraw these funds (with a $500 minimum) to meet their needs without labourious approvals, re-borrowing charges or additional fees. Other financial institutions in Canada either do not allow mortgage holders to access their extra payments without incurring a cost, or require a much higher withdrawal minimum.

"Save and Take Payments and the Save and Take Tracker are really helpful features of our new mortgage product not just because they allow customers to get out of debt faster, but also because they eliminate the trade-off customers often have to make between paying down their mortgage or saving extra money," Ferguson said. "For most mortgage holders, paying down the mortgage or saving is an either-or proposition, but with Coast Capital's You're the Boss Mortgage, they can reduce their mortgage debt while putting funds aside for unexpected needs, all at the same time."

Coast Capital's You're the Boss Mortgage also introduces innovation and flexibility in the area of rates. Norm Krannitz, vice president, treasury for Coast Capital Savings, said customers no longer have to face the dilemma of choosing between a variable or fixed rate.

"Rate is a key consideration for mortgage customers, but we all know that choosing between a variable or fixed rate can be quite difficult even for the experts, because you're trying to predict how rates will behave over the next five years," Krannitz said. "A rate combining the best features of the variable and the fixed option provides the advantage of balance. But typically customers who want this type of approach have to resort to two separate mortgages, which leads to added complexity."

Krannitz said with Coast Capital's You're the Boss Mortgage, customers can now choose from a five-year fixed rate, a five-year variable rate, or, for those who are undecided or simply want some of the advantages of both, the newly introduced Half & Half^TM Rate.

Coast Capital's Half & Half Rate is priced at the mid-point between the current variable and fixed rates. It will start lower than a fixed rate and won't rise or fall as fast as a regular variable rate, changing only by half as much as the prime rate.

"A fixed rate feels safe, but you could end up paying more in the long run," Krannitz said. "Conversely, while a variable rate is lower, it could go up quite a bit over the term of your mortgage. Coast Capital's Half & Half Rate eliminates all that guesswork by allowing customers to hedge their bets, regardless of the fluctuations in the prime rate."

Coast Capital's You're the Boss Mortgage is supported by the credit union's research which showed 40 per cent of mortgage holders in the Lower Mainland and Vancouver Island area set aside funds for emergencies rather than using this money to pay down their mortgage, while 47 per cent were unsure about whether to purchase a fixed or variable rate mortgage. Coast Capital's survey took place in March this year and involved 1,154 respondents across the credit union's market area.

To help get the word out about the You're the Boss Mortgage, Coast Capital Savings is stationing fully decked out butlers at the credit union's downtown Vancouver branch (1075 West Georgia St.) and Victoria Bay Centre branch (1150 Douglas St.) on Tuesday November 9 from 7 a.m. to 12 p.m. The butlers will be surprising visitors to the branch with a "boss treatment" when they arrive, including shining customers' shoes, providing hair touch-ups and serving beverages.  

Coast Capital Savings is Canada's second largest credit union with total assets under administration of $12.9 billion, more than 425,000 members and 50 branches in the Metro Vancouver, Fraser Valley, and Vancouver Island regions of British Columbia. Product innovations include Canada's first free chequing account from a full-service financial institution and a high-interest, no-fee savings account. Named as one of Canada's 50 Best Employers and 50 Best Managed Companies, Coast Capital Savings is designated a Caring Company by Imagine Canada. To learn more, visit www.coastcapitalsavings.com.

MEDIA BACKGROUNDER

Flexible payment and withdrawal features of Coast Capital's You're the Boss^TM Mortgage vs. other Canadian financial institutions*

5-Year Mortgages
	Coast Capital Savings' You're the Boss™ Mortgage	Bank of Montreal	CIBC	RBC	Scotiabank	TD Canada Trust	HSBC	ING
Prepayment annual limit	30% of the original mortgage principal, payable any time	20% of original mortgage principal, payable anytime	Variable rate mortgages: 20% of the original mortgage principal Fixed rate mortgages: 10% of the original mortgage principal. Payable anytime	10% of original mortgage principal. Payable once in every 12 months	15% of the original mortgage principal, payable anytime	15% of the original mortgage principal, payable anytime	20% of the original mortgage principal, payable anytime	25% of the original mortgage principal. Payable on any regular payment date
Extra payments limit	100% of the current scheduled payment amount Payments can be increased on any payment date	20% of the current payment amount. Payments can be increased once per calendar year.	100% of the current scheduled payment amount. Payments can be increased on any payment date	100% of the current scheduled payment amount. Payments can be increased on any payment date. 10% (payments can be increased only once every 12 months)	15% of the current scheduled payment amount. Payments can only be increased on the anniversary date	100% of the current scheduled payment amount. Payments can be increased on any payment date.	20% of the current scheduled payment amount. Payments can be increased on any payment date.	25% of the current scheduled payment amount. Payments can be increased on any payment date.
Ability to withdraw funds from the prepayments or extra payments made, without penalty	Yes, subject to a $500 minimum	Yes, subject to a $2,500 minimum	No	No	No	No	No	No

*Information was obtained from the financial institution's public websites as well as phone surveys in October 2010.

BACKGROUNDER: Coast Capital's You're the Boss^TM Mortgage

THE HALF & HALF^TM RATE

Coast Capital's Half & Half Rate captures the best features of fixed and variable rates. It will start lower than a fixed rate and won't rise or fall as fast as a regular variable rate, changing only by half as much as the prime rate. The following example illustrates this:

Customer signs up for mortgage at current rates

5-year fixed rate: 3.45%
5-year variable rate: 2.20%*     
Half & Half Rate: 2.80%**      

The Half & Half Rate is lower than the fixed rate, while providing the customer with the benefits of a variable rate that changes only by half as much as the prime rate.

When prime goes up

At a point during the 5-year term, if the prime rate moves up by 1% to 4.00%, the following happens:

5-year fixed rate: 3.45% (unchanged)
5-year variable rate: 3.20% (increases by 1% just like the prime rate)
Half & Half Rate: 3.30% (increases by 0.5%)***       

The Half & Half Rate has gone up only by half the prime rate and is still lower than the fixed rate.

Benefits of the Half & Half Rate

• Allows mortgage holders to "hedge their bets"

The Half & Half Rate eliminates the need to guess what the prime rate will do. Typically, if you believe prime will go up, you tend to choose a fixed rate. If you think prime will fall, you go for a variable. But no one really has a crystal ball on which way prime will go so customers who want to minimize the potential fluctuations that come with either choice will be attracted to the balanced approach of the Half & Half Rate.

• Simplicity

Mortgage applicants who want to hedge their bets against changes to the prime rate typically have to apply for two separate mortgages, often with two different payment schedules and associated paperwork. One mortgage is hard enough to manage, let alone two. With Coast Capital's You're the Boss Mortgage, hedging your bets is now as simple as choosing the Half & Half Rate.

• Control

Customers with the Half & Half Rate have the assurance that it will not fluctuate wildly, affecting their debt and financial obligations. This decreased uncertainty gives them greater control of their finances and budget.

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*Prime (3.00%) - 0.8%
** (5-Year fixed rate + 5-year variable rate)/2 = Half & Half Rate
(3.45% + 2.20%)/2 = 2.825%. Actual rate is rounded down to benefit customers

*** Current Half & Half Rate + [(New Prime - Old Prime)/2]
2.80% + [[4.00% - 3.00%)]/2 = 3.30%

For further information:

Divine Agodzo
Manager, Media Relations, Coast Capital Savings
Cell: 604.837.6372   
E-mail: [email protected]

Julia Smith
Peak Communicators
Cell: 604.803.0897
E-mail: [email protected]m