By Ron Butler
Let’s get some of the details out of the way: A mortgage rate comparison site is typically a website built and owned by an independent company that makes its living charging for leads and website clicks that are fed to mortgage brokers and other lenders. The aim of the rate site is twofold:
1. Find great rate offerings to spark public interest in its information or in clicking onto the websites of mortgage brokers and lenders offering those rates;
2. Do all the search optimization work on Google to make sure every time someone searches “Best Mortgage Rates” the rate site’s name appears at the top of that Google list.
Historically, my brokerage has used RateSupermarket.ca and if you Google “Best Mortgage Rates” that site will come up No. 1 or 2 on Google’s list every time.
The rate sites are smart: if you want to be the featured mortgage broker on the website, you need to buy-down rates by reducing commission levels to the point where the rate is extremely low, it’s almost a reverse auction system.
So picture this: you have paid the website for the leads and only about 42 per cent of the leads work out to the point the applicant gets a commitment; so you pay for about 2.5 leads to get a shot at one.
You have discounted the rates so you are only working on about 65 bps total compensation not 115 bps. The applicants are extremely rate-sensitive and have zero loyalty to you, if a bank rep offered them 5 bps less they would jump to the bank rep in a heartbeat. The applicants are unlikely to ever stop being rate-sensitive so when they come up for renewal it will be the same fight for their business all over again. These types of clients may very well refer others to you, but those referrals also want super low rates. These clients will likely never think of you as a trusted adviser; they will only think of you as a source of low rates. So the leads are very expensive, the commissions are highly discounted and the clients will always check to make sure they are getting the best possible rates.
So why should you do it? - continued on page 2