A new home for sale in Ottawa in July, 2020. Canadians are searching for the largest banks’ mortgage rates at levels that exceed comparable U.S. brand queries, writes Hanif Bayat.Sean Kilpatrick/The Canadian Press
Canadians like to think of themselves as prudent borrowers. But in the mortgage market, that prudence can look like inertia.
The data on mortgage-related search behaviour reveals a pattern that should concern policy makers and borrowers: Many Canadians are not truly shopping for mortgages. They are defaulting to familiar brands.
In the United States, mortgage searches are overwhelmingly generic. Americans search online using terms such as “mortgage rates” far more frequently, at roughly 15 times the volume used by Canadians. But the data changes sharply when you look at brand-specific searches.
Canadians, in fact, search for the largest banks’ mortgage rates at levels that exceed comparable U.S. brand queries. Searches for “RBC mortgage rates,” for example, significantly outpace U.S. equivalents such as “Chase mortgage rates” or “Navy Federal mortgage rates.”
The implication is clear: Many Canadians, unlike their U.S. counterparts, start with a logo. That is not typical behaviour in a competitive market. It suggests that many borrowers have effectively made up their minds before they begin.
This goes beyond brand loyalty – it is brand dependence. And it has consequences.
Part of this brand dependence traces back to the failures of several trust companies in the 1980s and early 1990s, which blurred the line between smaller and riskier lenders. Despite stronger regulation today, many borrowers still equate size with safety and default to large banks.
Canada’s largest banks benefit from an ecosystem that reinforces their dominance: vast advertising budgets, entrenched distribution channels and a regulatory framework that, intentionally or not, favours incumbents.
Smaller lenders, such as credit unions and fintechs, may offer lower rates or more flexible products. But without comparable visibility, in many cases, Canadians don’t consider them.
The wave of missed mortgage payments that never came
In practical terms, many Canadians are not necessarily choosing the best mortgage; they are choosing one of the most familiar.
That may help explain a troubling trend: Despite the arrival of new lenders and fintech players, the largest institutions have continued to increase their share of the residential mortgage market over the past decade.
In a functioning competitive market, new entrants would challenge incumbents. In Canada, they barely make a dent. Borrowers are not the only drivers; smaller lenders face far greater challenges in securing funding than large banks.
It is tempting to see this as a consumer preference. But the reality is more concerning. If borrowers never look beyond familiar lenders, they cannot know whether better options exist.
Limited awareness weakens competition, and that matters. Competition drives lower rates, better service and innovation. Without it, markets favour incumbents over consumers.
There is a long-standing view that Canadians are simply more risk-averse than U.S. consumers. Perhaps. But risk aversion should not mean ignoring options altogether. Because in a market as consequential as mortgages, not shopping around enough is not caution. It is costly.
Hanif Bayat, PhD, is the CEO and founder of WOWA.ca, a Canadian personal finance platform.
