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When a Montreal branch of the Bank of Nova Scotia recently contacted Daniel Goldsmith with an offer to lock in his adjustable mortgage rate with a cash-back incentive, it unwittingly caused an internet uproar.

That’s because Mr. Goldsmith took to Reddit wondering whether the bank was using the financial incentive to nudge him toward a fixed interest rate.

The incident shows how lenders’ long-standing practice of using cash back and other perks to help acquire and retain customers can sow suspicion and confusion at a time when many mortgage holders face complex financial decisions as their borrowing costs soar.

Scotiabank said its targeted offers are not specific to adjustable-rate customers who might be interested in locking into a fixed rate. Rather, the bank presents offers based on customers’ individual circumstances and needs.

Home owners with variable-rate mortgages face difficult squeeze as interest rates rise, house prices drop, Bank of Canada warns

“We provide targeted customer offers at times and are always looking at ways to add additional value for our customers,” Scotiabank spokesperson Andrew Garas said via e-mail.

“We reach out to our mortgage customers regularly to ensure their products and services are continuing to meet their needs and provide advice and options based on their financial goals,” he added.

Montreal-based Mr. Goldsmith, however, said the cash back incentive got him wondering about whether the bank wanted him to sign up for a fixed rate because it expected interest rates to start falling in coming months.

“I’m always immediately suspicious of stuff like that,” Mr. Goldsmith said of the bank’s communication. The lender offered to convert his adjustable mortgage rate into a 5.47 per cent fixed rate for a term of four years with a cash-back offer worth $1,200, according to an e-mail viewed by The Globe and Mail.

Wondering why the bank would offer cash for him to switch from an adjustable to a fixed mortgage rate, Mr. Goldsmith sought feedback on Reddit, where his post quickly garnered hundreds of comments, with many users voicing similar suspicions about the bank’s motives.

Adjustable and variable mortgage rates usually go up or down following movements in the Bank of Canada’s trendsetting policy rate. After a seventh consecutive interest increase on Dec. 7, the central bank signalled it may be close to the end of its rate-hike cycle. Its benchmark lending rate now stands at 4.25 per cent, up from 0.25 per cent at the beginning of March.

For borrowers like Mr. Goldsmith, whose mortgage installments have been rising with every rate increase, the past nine months have been a painful financial squeeze. He said the monthly cost of his mortgage has doubled since he signed up for the adjustable-rate mortgage with Scotiabank in August, 2021, with a rate of 1.45 per cent.

The outsized mortgage payment means Mr. Goldsmith and his spouse, who have three children, have had to pause saving for their retirement and the kids’ education savings funds. The family also had to stop charitable donations, and any spending on vacations is out of the question for now, Mr. Goldsmith said.

But if interest rates declined during the rest of Mr. Goldsmith’s mortgage term, his payment would also shrink, giving his family some much-needed financial breathing room.

While switching to a fixed rate would protect borrowers like Mr. Goldsmith from further interest rate hikes, it also prevents them from benefiting from any declines. That is, ultimately, why Mr. Goldsmith opted to stick with the adjustable rate.

He said he didn’t feel pressure from Scotiabank to lock in. But the cash-back offer complicated his decision about what to do with his mortgage, stoking concerns about the bank’s motivation for offering the incentive.

Banks have long used signing rewards to entice new and existing customers, offering anything from cash incentives to movie passes to promote products ranging from credit cards to bank accounts, said Ken Whitehurst, executive director of the Consumers Council of Canada. But financial incentives are “a distraction” for borrowers who face difficult decisions about their mortgages at a moment of significant uncertainty over the future trajectory of interest rates, he said.

Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank said they do not offer financial incentives to customers for locking into fixed mortgage rates.

Bank of Montreal said it regularly communicates with customers about their variable rate mortgages and works with each customer individually. However, the bank did not respond to a question about whether it provides targeted offers with financial incentives for locking into fixed rates.