When Dave and Karen Gordon moved back to Toronto from New York three years ago, they figured it would take about four years to get settled and then shop for a house.
In early 2010 they are now thinking about finding a real estate agent and strolling into their local bank to discuss financing.
But as budding new bank customers there is a new responsibility to understand what’s in store at the local bank as potentially changing financing regulations affect their personal situation in an unsettled economic climate.
The “need to know and what’s in store” is partially prompted from federal finance Minister Jim Flaherty’s musings in late 2009 that the government would consider raising the minimum down payment on a house from 5% to a “higher figure” and reducing the amortization period of 35 years to “something” less.
“I can understand the motivation behind it; given how so many people found they could no longer afford mortgage payments during the recession and their finances flopped. I’m sure it made things miserable for home sellers/real estate agents and banks…. [If implemented it] means people will generally rent longer or stick to apartments, or buy cheaper homes or move out of town if they want a house,” says Dave Gordon.
“We’re clearly going to have to track these musings and see whether they become policy and then we’ll have to rethink our immediate plans…If the minimum down payment is raised from 5% to 10% it will put a kink in our plans.”
The Gordons are an example of what’s in store for bank customers in 2010. As proposed regulations, new technology and the uncertain economy shapes the financial services sector there will be a new emphasis on bank customers getting with the plan.
At the same time, stiff competition in the financial services sector will put more pressures on banks to “reach out” to customers.
Beyond the potential tightening of the rules that affect mostly first time home buyers, the Gordons, like plenty of other homeowners will arrive at their bank with consternation about where interest rates are headed and how fast.
“I think what people need to do is to be comfortable with their own financial situation and the mortgages that they are selecting. When rates rise – - and rates will rise — [consumers should be] in a situation that they can carry their debt levels. That is the key thing. Can they lock in and can they do it fairly quickly? These are key questions that they should ask their mortgage professional,” says Jim Murphy, President, Canadian Association of Accredited Mortgage ProfessionalsCAAMP. (www.caamp.org).
According to the CAAMP survey in fall, 2009, 60% of mortgage holders have fixed rate mortgages, while 27% have variable and adjustable rate mortgages. Now more than ever, both groups will need to know what they signed to see what their options are.
As many investors dust themselves off from the ravages of the markets in 2009, it will be those who know about the new value, educational tools and opportunities in direct investing who will flourish.
According to Jason Storsley, President and CEO RBC Direct Investing customers will have advanced supports and information in 2010 as investor empowerment accelerates.
“One of the things we hear from our clients is that they didn’t realize how easy it would be to become an online investor. And they didn’t realize how much free information is available to them at their fingertips. Clients coming into an RBC branch may not be expecting how robust the online investing platform is through RBC.One of the changes we have planned for 2010 is to continue to improve and increase the financial literacy and education materials that we offer our clients,” says Mr. Storsley.
In the area of innovation and convenience, bank customers might want to know about the pending launch of Visa Debit and MasterCard Debit products in 2010. According to Amy Cole, Corporate Relations, Visa Canada, debit cards are the most frequently used payment cards in Canada and the proposed Visa Debit cards will offer cardholders core features not currently available in the Canadian marketplace. Visa Debit cardholders will be able to go where no other debit card has gone before. They can be used at retail locations worldwide, for online shopping and for mail and telephone orders.
“Canadians that travel may also find special appeal. Cardholders travelling internationally can use a Visa Debit card to shop in stores around the world; to withdraw local currency from an automated bank machine (ABM); and, provides Canadian travellers the option of reserving hotel rooms or rental cars with a debit card. Should a Visa Debit card be lost or stolen when overseas, cardholders can contact their Visa Debit card issuing financial institution for an emergency replacement,” says Ms. Cole.
It is hoped that bank customers will finally see that the reports of the death of the neighbourhood bank branch are premature.
While online banking continues to grow exponentially, there’s no longer a need to drag race to your local branch due to “banker’s hours.” Consumers now have a choice of more branches, longer hours and even some openings on Sundays.
According to the Canadian Banker’s Association, for the nine largest banks, there were 5902 branches in 2006, 6021 in 2007 and 6142 branches in 2008.
The trend is expected to continue in 2010.
Despite robust initiatives to stop the proliferation of fraud and identity theft, Canadians must know about the risks and the preventative strategies they can use. In a 2008 survey of Canadian consumers conducted by the McMaster eBusiness Research Centre (MeRC) on behalf of the Ontario Research Network on Electronic Commerce (ORNEC) it was found that most victims (57%) did not know how their personal information was accessed, but when they did know, the identity fraud was most often associated with a business transaction conducted either in person (25% of these cases) or online (15% of these cases). Debit card skimming operations made up another 13% of the cases where the method of access was known.
Frequent and careful monitoring of bank and credit card accounts is the best way to detect and minimize the effects of identity frauds. Moreover, bank customers should check their credit report on a regular basis. The MeRC study found that 49% had never requested a copy of their credit report.And bank customers should conduct an occasional check of land registry records, which is a hedge against mortgage fraud.
Interac and the credit card companies will be ramping up their movement to chip technology. Interac estimates that $104-million was lost to debit card fraud in 2008.The microchip, embedded into the debit card, is extremely difficult and costly to duplicate, and will play a significant role in preventing debit card skimming.
Chip technology will provide opportunities for new product and service offerings such as stored value or loyalty programs on one card. Magnetic stripe transactions will no longer be accepted at Automated Banking Machines after December 31, 2012 and will no longer be accepted at point-of-sale after December 31, 2015.
Both Visa and MasterCard and the banks that offer these credit cards will also be ramping up the issuance of “chip cards” to bank customers in 2010.
Instead of swiping a card that has a magnetic stripe on the back, customers will insert a card that has a computer chip embedded on the front. Instead of signing to verify a payment, you will enter a private Personal Identification Number.
MasterCard has stated that during 2010 it will be adding more infrastructure and that once that is in place, they will use the chip’s greater capacity to carry unique payment applications and custom features.
As for the Gordons, they’re still watching interest rates and whether the rules government mortgages will tighten up.
“We only found out about the possible increasing minimum down payment recently but it’s an essential piece of information to have. It’s an essential to know for the banking customer and mortgage shopper.ithout this knowledge many will walk into the housing market and hit a brick wall,” says Mr. Gordon.
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