Sunday, 9 December 2012

Private banking

This isn’t a topic particularly pertinent to mortgages in general.  But I think it’s relevant as an example of how you can get lured into signing up to a higher cost mortgage based on sexy features that you do not need and/or will not use.

When the Millionaire on Heels was researching mortgage offerings prior to purchasing my latest property, I looked at the typical sources I’ve mentioned in previous posts: my financial institution at the time, comparison websites, a cash back mortgage broker, etc.  I focused most particularly on the total cost of each package versus any unique benefits (which there weren’t a lot of – most packages are quite similar).  Then I attended a presentation from one of the major banks to the partners and directors of my employer at the time.  They left an attractive brochure outlining their private banking offering for us.

I rang them up one day and, after a series of meetings, was ushered into the rarified world of private banking.  The fees were waived as part of the arrangement with my employer, but the interest rates on offer were slightly higher than I could get at the other major banks via a broker – by maybe 0.05% to 0.10%.  So I thought it would represent good value for money.  I imagined regular consultations in their offices, discussing my individual needs, the best strategies to address them, etc.  The reality has been a bit different.