2.99 returns; sparks competition

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Brokers are used to having the best rates available in the market but for now it looks like they’re being beat out by one local credit union; though it appears it may have sparked another “rate war,” with one leading broker offering a competitively priced product.  

Meridian Credit Union is offering a 2.99 per cent five-year fixed rate at the branch level in Ontario only. The rate includes a 45 day rate hold and a 20 per cent lump sum option for both monthly and yearly payments.

“It’s a 45 day close, so that’s about the only (limitation and) all the other conditions are normal; the 20 per cent increased principle and anniversary payments,” Bill Whyte, chief of member services at Meridian Credit Union told MortgageBrokerNews.ca. “The only thing we shortened is the 90 days to 45 days. We haven’t limited any of the other conditions.”

And although the rate is only being offered to members of the branch, Meridan is still focusing on offering brokers more "niche" products.

"We do have … a pretty competitive rate available for brokers," Whyte said. "Where we focus for brokers is on niche mortgage products – that’s business-for-self mortgages, construction mortgages."

In early February Industrial Alliance offered a five-year fixed rate at 2.99 per cent, though the promotion only lasted a week. The offering drew the scorn of many brokers, who felt the product’s lack of bridge financing could be a detriment to clients.

“I have a problem with offering a product that isn’t what I consider a full service mortgage in the sense that it is missing things, for example bridge financing,” Dan Faubert of Ottawa-Carleton Mortgage told MortgageBrokerNews.ca at the time. “Industrial Alliance doesn’t have that feature in any of their mortgages.”

Meridian is the only lender offering a sub-three per cent five-year fixed product; though Whyte believes its rate may spark some competition.

“We wanted to get out there quickly,” Whyte said. “It may start some interest, I’m sure our competitors and like-minded organizations are looking at it and taking into account as they consider what they should do.”

And at press time it looks like that competition has already begun, with Verico Butler Mortgage offering a 3.04 per cent five-year fixed rate, according to RateSupermarket.ca
  • Sophie on 2014-02-24 12:29:45 PM

    That is the end for me in submitting deals to Meridian Broker Services. BDM's, don't come knocking on my door for business.

  • Dan Faubert on 2014-02-24 12:32:15 PM

    the 2.99% at Meridian, doesn't allow that rate for no fee transfers, so everyone keep that in mind when advertising potentially bought down rates. I'm just tired of spending money buying down rates unnecessarily :)

  • Dan Faubert on 2014-02-24 12:35:33 PM

    Never say never Sophie, there the only lender offering a "0" down payment mortgage with 5% cash back, and only one I know that provides a 1 yr rate guarantee as a cap rate builder product. Not something I use everyday, but when rates start to move upwards possibly a valuable tool for business.

  • Joe on 2014-02-24 12:37:31 PM

    good bye Meridian, you're on your own

  • Sophie on 2014-02-24 12:46:32 PM

    I have another local Credit Union offering cash back 5% for the downpayment. Everyone should check with their local credit unions for this product. Meridian isn't the only one that offers it.

  • Lynn Eggert, AMP Mortgage Intelligence on 2014-02-24 12:51:38 PM

    It should also be noted that this is not available for urban clients who are not within a 20min drive to a local Branch; or, Rural clients that are not within a 30min drive from home or 15mins from place of work.

  • KJL on 2014-02-24 1:20:38 PM

    Once again disappointment sets in. What is good for the goose will affect the gander here. If you can wait 5 days for MCU's answer and commitment, their km from branch rule, and slow email replies if you ever get one - chances are your condition of finance will expire. Get use to it folks, is what these cats do. Sophie is right, several options out there . Good luck MCU

  • Anthony C. on 2014-02-24 1:24:39 PM

    to Bill Whyte....

    competitive rates and niche products my ass...

    And when are the editorials at MortgageBroker news going to start reporting which doesn't blatantly favour one particular Broker's low rate over another...we can all for the most part offer 3.04%...

  • Salim J Kanji on 2014-02-24 1:32:36 PM

    Thanks Meridian...All other lenders will follow your lead.

  • race to the bottom on 2014-02-24 1:46:00 PM

    this industry is in trouble and this is one of many reasons why. The internet and banks will take it to the bone and anyone left will simply be an order taker being paid a very nominal fee.

  • Ron Butler on 2014-02-24 2:10:12 PM

    @ race, it's called competition and productivity, for some clients 3.04% will work but if you think this rate competition stuff will go away I recommend returning to your job at the vinyl record disc plant........... but wait maybe that does not work for you either.

    The consumer wants lower rates and if you are against that then you really should not be working as a mortgage broker.

  • Angela Wong-Liao on 2014-02-24 2:30:08 PM

    Meridian Credit Union is not a chartered bank which means it does not have the same influence as BMO in 2013. Credit Union is regulated by their Credit Union Act, which means they can only offer to members of the branch. Frankly, I do not think it is a big impact to rate war. Though, I do not believe that it is fair to the broker channel if Meridian only offers this pricing to their branch channel, if Meridian wanted to get business referral from the broker channel, our channel should have the same pricing as their branch channel.

  • Angela Wong-Liao on 2014-02-24 2:30:28 PM

    Meridian Credit Union is not a chartered bank which means it does not have the same influence as BMO in 2013. Credit Union is regulated by their Credit Union Act, which means they can only offer to members of the branch. Frankly, I do not think it is a big impact to rate war. Though, I do not believe that it is fair to the broker channel if Meridian only offers this pricing to their branch channel, if Meridian wanted to get business referral from the broker channel, our channel should have the same pricing as their branch channel.

  • Paul Mangion on 2014-02-24 2:37:59 PM

    There have been many industries that have raced to the bottom. Eg. Trucking. Most people want lower rates but some still want that personal touch. If we only focus on the rate customers then the smaller less efficient outfits will go out of business. But in the end when the decent income goes to fewer people the majority of people will have less disposable income to spend and the cycle will just gets worst. Those of you that hate buying down rates should re invent themselves since there will always be a customer for you and let the other guys chase that rate client. Your quality of life will be better in the long run.

  • Ron Butler on 2014-02-24 2:49:02 PM

    @ Paul.... you may be right about competition making trucking a low margin business but the truth is there are more trucks on the road than ever and lower transportation costs and more efficient logistics help make Walmart and other chains the success they are today.

    People may hate the idea of the Walmart comparison but facts are facts: Sam Walton; and today his heirs represent the biggest success in the history of business. as a group his heirs are worth more than Buffett and Gates combined.

  • Sophie on 2014-02-24 2:59:19 PM

    I emailed our Broker rep from Meridian, and this is his response. "Correct, this is NOT offered to brokers."

    When there are huge outdoor signs at their branches advertising 2.99% for 5 yrs in our community, buying down is the only alternative to compete. They want broker business and yet they offer this. IMO this is a result of employee's not meeting mortgage targets, and whining its because brokers get better rates. And so it starts, I had to take a call while typing this, client closing Friday, drove by Meridian this morning and saw the sign.

  • Paul Mangion on 2014-02-24 3:17:16 PM

    Ron. I agree with you. However I remember reading a report that said that crime increased in most small communities where a WalMart has opened. Now I can only assume that some crime is out of necessity. Of course in a much bigger city like Toronto those effects will take generations rather than a few years to show up. Anybody living in GTA for the last 20 years cannot look anybody in the eyes and say it is better today than it was 20 years ago... Just saying.

  • Stan on 2014-02-24 3:27:50 PM

    @ Lynn, you don't have to live within 20 minutes of a branch, you can arrange over the phone. I just phoned for further information on this product

  • race to the bottom on 2014-02-24 4:59:00 PM

    @ Ron, contrary to your statements I believe that competition is here to stay, what you are failing to see is that the only thing the consumer really cares about is price. We can say all we want about service, creating a plan, strategy whatever you want to call it, at the end of the day, it is price that wins. The banks can use price and technology to squeeze out the broker, its being done right before our eyes. You can't be niche anymore cause the banks have taken all that away by approving loans that can only be done at the branch or through their Road reps. Even Meridian is only giving this rate to walk ins, thats a problem for brokers and no one else. There is major disruption happening and more coming. Wait till Google and other huge Tech Co.s get involved in this game. We haven't seen anything yet. On yea, truckers don't make money anymore, nor do employees at Walmart. Walmart's biz model is killing everything in its path...you might be the guy taking orders at the Walmart Mortgage Center one day and they won't be paying 100bps to you, it will be like $15/hr. lowest rates guaranteed!

  • Paul Mangion on 2014-02-24 5:12:56 PM

    I hate that word Guaranteed. You are only guaranteed to die and pay taxes if you are one of the fortunate ones to make some money. If not Walmart is always hiring.

  • race to the bottom on 2014-02-24 5:28:10 PM

    here is Walmarts latest target..http://business.time.com/2014/02/24/walmarts-big-push-to-go-small-and-destroy-your-neighborhood-dollar-store/

  • Ron Butler on 2014-02-24 5:36:00 PM

    @race.......... there are plenty of truckers, there are plenty of Walmart employees, there will always be mortgage brokers Will there be less of them? Not likely. Will they make less money per transaction, absolutely that will happen. But don't be sure that bank road reps will rule the world of rate eternally.

    I don't think mortgage brokers are doomed at all, I think mortgage brokers will adapt, improve productivity and work hard to innovate. We have a history of providing value to consumers and now we just have to work harder at it.

  • race to the bottom on 2014-02-24 5:58:18 PM

    someone I know that owns restaurants had 3 mortgage brokers in one week recently applying for a job. There will be less brokers, the volumes are not there and we cannot get deals done that we used too. There are many brokers that are or have gone into debt this last year, its tough out there. I talk to the road reps too, its tough for them, there are guys willing to do mortgages for a few hundred dollars or less just to get the deal. Thats great if you live at home with your parents. Scotia is making huge changes with their Road reps, they don't cover medical anymore, in fact you have to pay $50/mo now, they are not paying on the full amount on blend and extends only new money, this will have a huge impact on their brokers income.

  • Vince Gaetano on 2014-02-25 11:44:37 AM

    Whether it's buydowns, discounted fees or full service you offer, stick with the model your comfortable with and give it your full time attention. Who cares about the ex-brokers looking for work at a restaurant - they shouldn't have been in the business to begin with. The fact is, this industry did not have any barriers to entry and thousands of part-time brokers have contributed to the current market conditions. The broker who identifies exactly what is most important to the client and delivers will win....simple as that. Good luck to all of you.

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