What happens to my HSBC mortgage now that RBC owns it?

If you held a mortgage with HSBC Bank Canada, your mortgage account has been automatically transferred to RBC following their acquisition of HSBC's Canadian personal and commercial banking operations. Your existing mortgage terms and conditions, including your interest rate and payment schedule, will remain precisely as they were with HSBC until your current term matures. At renewal, you will interact directly with RBC as your new lender.

This transition means that when your mortgage term approaches its end, RBC will issue your renewal offer, and you will have the opportunity to either renew with RBC or explore options with other lenders, just as you would with any traditional mortgage renewal.

What are my options for my former HSBC mortgage now with RBC at renewal?

You have three primary options when your former HSBC mortgage, now with RBC, comes up for renewal: you can renew with RBC, switch your mortgage to a different lender, or refinance your mortgage.

Renewing with RBC is often the simplest path, as it avoids new paperwork and credit checks unless you're seeking to borrow more. However, it's crucial to negotiate the rate offered, as their initial offer may not be the most competitive. Switching your mortgage to a new lender can potentially secure a better rate and terms, but it involves new underwriting and, for insured mortgages, can incur legal and appraisal fees, though some lenders offer to cover these. Refinancing means breaking your existing mortgage to get new funds or change terms significantly, typically incurring penalties and a new stress test, making it less common unless you need to access home equity.

Regardless of your choice, understanding the market rates and your financial position is key to making an informed decision that saves you money over your next mortgage term.

Will I need to pass the mortgage stress test if I switch lenders?

No, you will not need to pass the mortgage stress test (OSFI B-20 guideline) if you switch your uninsured mortgage from HSBC to a new federally regulated lender by November 1, 2024, thanks to a temporary exemption for renewing mortgages.

This exemption, outlined in OSFI's December 2023 update to Guideline B-20, allows borrowers with uninsured mortgages that are up for renewal to switch lenders without re-qualifying under the stress test rate. This is a significant advantage, as the stress test can make it difficult for borrowers, especially those with existing mortgages, to qualify for a new loan at the benchmark rate plus 2%. This exemption is specifically designed to facilitate competitive switching for renewing mortgages, ensuring borrowers can access better rates without penalty. For insured mortgages, the stress test is still applicable when switching lenders.

It's important to note that this exemption is temporary and was implemented to address specific market conditions following recent rate increases and the RBC-HSBC acquisition. Always verify the current OSFI guidelines or consult a mortgage professional for the most up-to-date information on stress test requirements.

How can I ensure I get the best mortgage rate at renewal with RBC?

To ensure you get the best mortgage rate at renewal with RBC (or any lender), proactive preparation and comparison shopping are essential.

Begin by researching current market rates from various lenders and brokers approximately 4-6 months before your renewal date. Don't simply accept RBC's initial offer; present them with competitive quotes you've received from other institutions. Many lenders, including RBC, have some flexibility in their pricing, especially when faced with the risk of losing a client. Consider using a mortgage broker, as they have access to a wide network of lenders and can often secure rates that are not publicly advertised.

Having a strong credit score and a clear understanding of your financial situation will also strengthen your negotiating position, as lenders favour low-risk borrowers.

What are the financial implications of renewing with RBC versus switching?

The financial implications of renewing with RBC versus switching lenders primarily revolve around interest rates, potential fees, and the impact on your monthly payments.

Renewing with RBC may seem cost-free, but accepting a higher rate than you could get elsewhere translates directly into higher interest paid over the term. For example, on a $400,000 mortgage balance over a 5-year term:

Switching lenders, while potentially offering a lower rate, might involve some costs such as appraisal fees, legal fees, and discharge fees from RBC, though many new lenders offer to cover these costs (often called 'no-frills switches' or 'transfer packages'). It's critical to weigh the potential savings from a lower interest rate against any upfront switching costs to determine the most financially advantageous path.

Let's say you have a $400,000 mortgage balance with 20 years remaining. RBC offers you 5.24% for a 5-year fixed term, while another lender offers 4.89%.

At 5.24%, your monthly payment would be approximately $2,698. At 4.89%, your monthly payment would be approximately $2,624. That's a monthly saving of $74, or $4,440 over a 5-year term. Even if you paid $1,000 in switching fees, you'd still save $3,440 over the term.

This example illustrates that a seemingly small difference in rate can lead to significant savings over the mortgage term, making it worthwhile to explore all your options.

The table below illustrates a comparison of renewing versus switching:

When should I start preparing for my former HSBC mortgage renewal with RBC?

You should start preparing for your former HSBC mortgage renewal with RBC approximately 4 to 6 months before your current term matures.

While RBC is required to send you a renewal offer 30 to 60 days before your term ends, starting earlier gives you ample time to research rates, assess your financial goals, and explore all your options without feeling pressured. This early start allows you to engage with a mortgage broker, collect competitive quotes, and use them as leverage when negotiating with RBC. It also provides enough time to gather any necessary documentation if you decide to switch lenders, ensuring a smooth transition and preventing you from being forced into a last-minute decision that might not be in your best financial interest.

A well-planned renewal can save you thousands of dollars over the next mortgage term.

Does the Bank of Canada's policy rate impact my RBC mortgage renewal?

Yes, the Bank of Canada's (BoC) policy interest rate has a significant impact on your RBC mortgage renewal, particularly for variable-rate mortgages and indirectly for fixed-rate mortgages.

For variable-rate mortgages, changes to the BoC's overnight target rate directly influence your prime rate, and consequently, your variable mortgage rate and payments. For fixed-rate mortgages, while not directly tied to the overnight rate, market-based rates for fixed mortgages (like 5-year bond yields) often move in anticipation or reaction to the Bank of Canada's monetary policy decisions, including inflation targets and economic outlook. Therefore, the BoC's decisions play a crucial role in shaping the interest rates you will be offered at your renewal, whether you opt for a fixed or variable product.

Monitoring the Bank of Canada's announcements and understanding their implications for mortgage rates is a key part of preparing for your renewal.

Navigating your mortgage renewal after a bank acquisition like HSBC by RBC requires diligence, but it also presents an opportunity to secure a better deal. Don't assume your new lender will automatically offer you the best terms. Always compare, negotiate, and consider all your options. For a personalized assessment of your mortgage renewal options and to compare rates from multiple lenders, try our free renewal review or use our mortgage renewal calculator to estimate your potential savings.