- Hey, welcome back.
It's Nolan Matthias from Mortgage360
and today I want to set the record straight
on HSBC and their mortgages.
Because quite honestly it is absolutely appalling
how many people in the industry
are talking negatively right now about HSBC,
spreading rumors like they have a bonafide sale clause
and a whole bunch of other crap.
It's absolutely untrue,
and today what I wanna do is I want to dispel those myths,
tell you what you really need to watch out for
in an HSBC mortgage and make sure
that you get transparent, honest, and clear information,
just like we've always committed to you on this channel
and like we've always committed to you with Mortgage360.
So before we get into it, though, do me that favor.
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Okay, so let's get into it.
Let's set the record straight on HSBC
and tell you everything that you need to know about them,
starting with who they actually are
and what they're all about.
So HSBC Canada, like every other bank in Canada,
is a chartered bank
and therefore they have to follow
the same Canadian rules that come along
with being a chartered bank.
And Canada's rules with respect to banking
are some of the most stringent in the world.
Now from a size perspective in Canada,
HSBC is the seventh largest bank in Canada.
However, their holding company,
the company that is their parent company,
is the six largest bank in the world
and the largest bank in Europe.
And while HSBC stands
for the Hong Kong and Shanghai Banking Corporation,
they're actually located in London, England,
at least their head office is.
In fact they're located at 8 Canada Square,
which is ironic because we're talking
about HSBC Canada today.
Now for a bank like HSBC Canada,
there's both good things and bad things
that come along with being associated with the HSBC name.
Most notably was the Netflix series, "Dirty Money",
which profiled them in 2018
about their 2012 dealings with the Sinaloa cartel.
Notably, they were accused of trafficking money
for one of the biggest drug cartels in the world,
and as a result ended up paying
a 1.9 billion dollar fine in the US.
Now crazily enough, 1.9 billion dollars,
even though it seems like a lot of money,
was effectively a speeding ticket for HSBC globally
because it amounted for about five weeks' worth of profits.
And while a lot of the competitors of HSBC
and a lot of brokers are talking
about the profile in "Dirty Money",
I think it's an unfair characterization
to label HSBC Canada as a dirty bank.
In fact, I think they're anything but.
And it makes sense that a global bank,
one that has branches throughout the world,
would be targeted by drug cartels.
Because quite honestly, if you're a drug cartel
and you want to move money around the world,
are you going to do it with local banks
and try to get the money moved from bank to bank to bank?
Or are you going to pick a bank where you can move money
from country to country more easily?
So I don't think HSBC is necessarily a bad bank,
but they may have found a few bad actors, and who knows?
When drug cartels come and they bring photos of your family
and say, here's what's going to happen
if you don't do what we ask,
well, would you blame necessarily certain bankers
in certain countries for doing things
that they normally wouldn't do
or that a bank normally wouldn't do?
So the characterization of HSBC Canada
as a bad bank is absolute garbage.
I don't think there's such a thing
as a deliberately bad or corrupt bank in Canada.
Any sort of recommendation
based on that being a fact is absolute bullshit.
And it certainly shouldn't be a consideration
when you go to get your mortgage.
Now what are the things you should consider
when you're getting a mortgage from HSBC?
Well, let's talk about that and let's be clear,
honest, and transparent about it.
So the first thing you need to consider
when getting a mortgage from HSBC or any big bank in Canada
is the fact that they have big bank practices,
which for a mortgage borrower means big penalties
on five-year fixed mortgages
or any sort of fixed mortgage for that matter.
Now in HSBC's case, their variable rate products
are among the best in the industry.
They're actually great products,
but just like any other major bank,
their fixed rate mortgages are going to have penalties
that can be quite cumbersome,
especially if you don't expect them
in three to four years when you go to sell your property.
And keep in mind that stat, that 60 percent of Canadians
don't make it to the end of their term
when it comes to mortgages,
so four out of 10 will actually get to renewal date
and not have to worry about a penalty,
but the other six are eventually going to be faced
with some sort of a penalty.
And that's an important consideration,
especially when you look at things
like variable rate mortgages that are promoted
at under one percent that are basically being promoted
to first-time home buyers and people
who have less than 20 percent down
and therefore have a high likelihood of being converted
into fixed rate mortgages down the road
and ultimately into mortgages that have high penalties.
Now the second thing you need to consider
when you look at HSBC as a lender
is that as the seventh biggest bank in Canada,
they have a much smaller branch and ATM network
than most other banks,
which can make things like getting help,
getting information, harder to do.
It makes it a lot harder to walk into a branch
and make changes to your mortgages
because there are less of them.
And when you get there they may very well be busier
than what a normal branch at a BMO or an RBC
or a Scotiabank would be.
They quite simply aren't going to have the same resources
that the other big banks have.
Now the one thing I do like about HSBC
is that they do credit you back on ATM charges
when you make withdrawals or deposits at other banks,
but again, much smaller network of ATM's and branches
means less resources and ultimately could mean
not as good of service.
Only time will tell on that one.
Now the third thing you need to realize
is that as an international bank
there is the risk that they could end up leaving
our market at some point.
The most recent international bank that has done this
has been ING Direct.
They left after the 2008 financial crisis,
not because they weren't profitable,
but because they were highly profitable.
They ended up selling their assets to Scotiabank
and did so so that they could take the sale proceeds
back to their homeland and basically support
the operations there
when everything was really, really tough in Europe.
Other banks that have left the Canadian market
are Wells Fargo,
who at the time was the second biggest bank in the world,
and Macquarie Financial,
a very big Australian bank
that left for similar reasons to ING Direct.
Now I'm not saying that we run the risk
of HSBC leaving the Canadian market.
But what I am saying is that when you consider its mortgages
apples-to-apples to a Canadian bank,
that's one thing that you have to consider
and it is a potential risk factor.
And what that means for you
is if they sell off their assets to another bank,
you could end up with a mortgage lender
that is substantially different in practices and policies
than the one that you originally signed up with.
This is what happened to ING Direct clients
when they started getting
their Tangerine mortgage renewal statements
that were at substantially higher interest rates
than what ING ever offered.
The fourth thing to consider
is that HSBC definitely wants to be a bigger Canadian bank,
which means that they are prone to doing big promotions.
They do this on a regular basis.
We often see it in the mortgage world,
and what is happening right now
in the middle of their 0.99 percent variable rate promotion
is that they're absolutely getting swamped
and their resources are running thin.
And what that means for existing HSBC borrowers
is that if you are somebody who needs a deferral right now
or needs to make a change to your mortgage
or needs to call in and get help, well,
because the resources are being stretched so thin,
it's harder to get service from HSBC.
So it's something that you definitely need to consider
from the aspect of,
do you want to be caught in the middle of December
having to wait three to five hours on the phone
because they've absolutely swamped their systems
with a promotional rate that's being advertised
all over Canada and is picking up
massive amounts of media attention?
Now as far as things that are simply not true
about HSBC and their mortgages,
and this is something that we need to get out there
because there is a lot of rumors
and a lot of bullshit going around
about what's going on with HSBC's mortgage,
what their features are and everything else,
because basically brokers and banks are trying to compete
and don't have anything else to say
than what they would normally say
about no-frills mortgages that are offered elsewhere,
well, let's put that all to rest
because HSBC's mortgages are not no-frills mortgages.
Their 0.99 percent offer that they have right now
is actually a great variable rate
as long as you don't lock it in.
And it is also a mortgage
that it's fully open after three years,
which is a feature that most variable rate mortgages
don't have in Canada.
Now some brokers are running around,
some banks are running around saying
it has a bonafide sale clause or no refinance clause
that prevents you from being able to leave.
That is simply not true.
The features on their mortgages are the same,
if not better, than a lot of other banks.
Again, the only thing you really need to watch out for
is that big bank penalty that comes
with fixed rate mortgages at a big bank.
And as long as you can avoid that
an HSBC mortgage is as good as any mortgage in the industry.
That of course is assuming
that you can actually get in touch with them,
get your mortgage approved and get it closed in time
for your potential purchase or your refinance.
Now considering everything that I just talked about,
HSBC likely gets a far worse rep than they deserve.
They certainly aren't as bad of an entity
as their competitors and Netflix
would like to lead you to believe,
but they are a fairly small bank
with a massive promotion that is getting them
the sorts of volumes that only big banks dream of,
which is likely going to increase
their mortgage book substantially
and make them a bank
that isn't going to leave Canada anytime soon.
So I think it's safe to say
as long as you can get a mortgage with HSBC,
as long as you can get things done
in a reasonable amount of time,
and as long as you understand the things that come along
with a fixed rate mortgage with a big bank,
they're probably going to be an okay lender.
You probably aren't going to get the same level of advice
that you would get from a great mortgage professional,
because after all, they are a bank with limited resources,
but you'll get a mortgage that is comparable
to whatever else is out there and has similar features
to what all of the other banks offer.
And while I'm not advocating that anybody go directly
to their bank in order to get a mortgage,
because quite honestly it is better
to have somebody like a broker in between you and the bank
in order to advocate on your behalf,
much like a professional athlete
has an agent to be the go-between,
but if you are gonna go to HSBC to get a mortgage
do you understand that a lot of the rumors,
a lot of the things people are saying about them
simply aren't true,
and while they aren't the absolute best
mortgage product in the industry,
they don't have the necessarily the best lock-in rates
that the best mortgages in Canada have,
they do have a decent product
as long as it's a variable rate
and it is something that you can be comfortable with
as long as you know exactly what you're getting into.
So don't believe everything you see on Netflix.
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Thanks so much.
We'll see you on the next one.