Relationship Pricing: Banks Want to Be Your Everything
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Here's your Money Briefing. I'm J.R. Whelan at The Wall Street Journal in New York. Mortgage rates are low, but banks can be cajoled into giving you a sweetheart deal with a rate even lower. We'll chat with a Journal real estate reporter with details in a moment. First, some money and market news you should know. Colorado is known for skiing as well as leisurely activities that occasionally go up in smoke. But be sure to put home price stability on that list. Specifically, Boulder, Colorado is the nation's leader in homes that are least likely to see a significant price drop. In fact, a study from Smart Asset puts the odds of a 5% price drop at 0%. and properties in Boulder have increased an average of 268% in price since 1994.
Denver and Fort Collins, Colorado also made the top five, and San Jose, California and San Francisco entered the home price stability top 10 this year. And Amtrak says it will begin running limited nonstop Acela trains between Washington and New York in September. The nonstop route is a test of sorts to offer more frequent service on its business class line when a new fleet of trains arrives in two years. Now, starting in September the 23rd, the nonstop service will run a single round trip on weekdays leaving New York at 6.35 a.m., then departing Washington at 4.30 p.m., New York to D.C. is Amtrak's busiest and most profitable route, and the railroad says that skipping stops between the two stations will save about 15 minutes and puts the travel time at about two and a half hours.
Amtrak has also been doing track improvements along the route, essentially restoring what was a four-track wide rail line so that its trains can pass lower commuter and regional trains.
Should a bank be your friend?
What is relationship pricing and why are banks promoting it now?
Well, more and more banks are cozying up to customers, offering them attractive rates if they keep specific sums of cash in an account. And Wall Street Journal reporter Katie McLaughlin is on the line with us with some details. So, Katie, you know, we're not just talking about rates on deposits that banks offer and what's known as relationship pricing. Some banks will shave a fraction of a percentage point off the mortgage rate.
That's right. That's the offer. We will do better for you on your mortgage if you get into business with us, either by depositing funds with us or letting us, even better, letting us manage your investments.
And in terms of if you were to hold cash for the bank, we're talking about in the neighborhood of upwards of a million dollars. Is that right?
No, the banks have kind of a sliding scale, and some of them are fairly transparent about what they offer. Citibank even publishes a schedule. If you put in, I think it even starts at like $1 up to this amount, they'll waive one of the $250 fees. If you go all the way up to $1 million or over $1 million, it can become half a point or three-eighths of a point off of a mortgage rate. So it really depends. But yeah, it's a sweeter deal as you do more business with the bank and give them more money to either deposit or manage.
And this makes sense for the banks. They make a good deal of interest and make a good deal of money off of cash customers hold in accounts, or they make a good amount of money in managing the mortgages.
Where they really make money and what they really like is to manage your investments, to be your wealth advisor. So they really like that. They want wealthy customers to be banking with them and they want to manage their money for them because there's lots of fees and transaction fees and percentage fees, you know, depending on how they structure their wealth management compensation to be made off of somebody who has a lot of money under management. Also, if they manage it properly, that money is growing. So they, you know, they really like that and they really want to encourage these relationships.
Now, the idea of pitching these relationships and pitching these sweeter deals, is this something new or is just something that that's more pronounced now?
It's not totally new, but it's more pronounced and more banks care about it more.
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