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June 01, 2021

Mortgage twist appeals to conservative investors

By Gordon Powers, Sympatico / MSN Finance

A new type of mortgage has arrived in Canada. It’s from HSBC and is called the Smart Savers Mortgage. 

It works like this: You take out any kind of mortgage and then link it to one or more HSBC accounts. From there, any money in those linked accounts reduces your mortgage rate by a percentage that equals your savings divided by your mortgage.

For example, homeowners with a $300,000 mortgage at 4.6% who link $45,000 in deposits throughout the life of the mortgage, effectively reduce their interest rate to 3.9% since the total deposits equals 15% of the mortgage balance.

Since your payments stay the same, however, this reduced rate means you’d pay off more principal and cut your amortization by close to 3.5 years over the life of the mortgage.

HSBC, which has enjoyed success with this type of mortgage in Asia, is hoping the product will appeal to conservative investors. And there is a benefit if you insist on keeping a lot of cash on hand.

As interest rates charged on mortgages are higher than those offered on savings deposits, you’re effectively generating an interest “premium” over what you would receive on your regular savings. Get a mortgage broker to help you determine how competitive the HSBC rates are however.

The truth is, rather than sit on a pile of cash, you’re still better off paying your mortgage down whenever you can – an option, according to the Canadian Mortgage and Housing Corporation, which seems to appeal to the majority of us. 78% of Canadians said they wanted to pay their mortgages off as fast as possible and 33% said they had made a lump-sum payment toward that end.

I’m with them.



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...