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A client recently told me their mortgage was up for renewal in late January, and earlier that month — maybe four weeks before renewal — they received a mortgage renewal form from their bank, one of the Big Six. I was asked which term they should sign off on even though they didn’t like the rates very much.

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As it turns out, they had a really good reason to not like the rates. The bank was trying to take advantage of them, plain and simple.

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Their focus was on a five-year mortgage, either at a fixed or variable rate. They could sign a five-year fixed mortgage for 6.09 per cent or a five-year variable rate mortgage for 4.9 per cent or prime plus 0.45 per cent. This is obscene and let me show you why.

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At around the same time, we have a partnership with a bank where our clients can get very good mortgage rates. Not always the very best rate out there, but always a very good rate.

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At the time, another client had been offered a five-year fixed rate of 4.04 per cent and a five-year variable rate of 3.75 per cent or prime minus 0.7 per cent. That is 2.05 percentage points lower on the fixed and 1.15 points lower on the variable. That is a shockingly large difference, but let’s take a look at it in dollar terms.

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If we assume a $500,000 mortgage, you will be worse off by $63,450 over five years, using a Canadian mortgage calculator at calculator.net. This is made up of $49,270 of extra interest and $14,180 of reduced principal paid down.

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But it is worse than that.

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Not only are you effectively gifting the bank almost $12,700 a year after tax, but you will also have a higher principal balance after five years. This means you will end up paying more interest going forward because you didn’t pay down the principal further during the five years of the mortgage. It is the gift to the banks that keeps on giving.

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The gap on the variable-rate mortgage wasn’t quite as terrible, but it would still likely cost an extra $36,000 over five years.

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So, how do you save this $60,000 or so over the course of a five-year fixed mortgage? Apparently, it isn’t that difficult.

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I offered to get on a call with my client and their bank. I told them that we are able to help our clients get much better mortgage rates at one of their competitors. I quoted the 4.04 per cent rate that was recently offered to my other client for a five-year fixed-rate mortgage, and the person at the bank mortgage centre said, “Oh, 6.09 per cent is the posted rate; we can do 4.19 per cent.”

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Say what? They asked the client to sign off at 6.09 per cent, but one phone call and one question later brought it down to 4.19 per cent?

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On one hand, that is great. On the other hand, the bank essentially has told an existing mortgage holder in good standing that it is hoping to screw them over and get them to just sign the renewal form at the “posted rate.”

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I then asked if that was the lowest rate they could do. My client was hoping to get 4.04 per cent. The banker’s response was that it was the lowest they were authorized to do, but they would send it to their manager to see what they can do. They informed my client to call back on Monday to find out.