In the wake of falling rates, private lenders may have a tougher time selling clients on higher rates; but not if expectations are properly managed.
“I would say it’s the broker’s job to inform the borrowers about what is going on in the marketplace. Whether A-lenders’ rates are 2.5 per cent or 4 per cent and the non-bank lenders’ rates are significantly higher, say 7-8 per cent, even if we were to match the A-lenders drop in rates by 25 basis points, it’s still significantly higher,” David Vyner of New Haven Mortgage told MortgageBrokerNews.ca. “It’s pretty much fairly safe to assume the majority of non-bank lenders will not drop their rates in sync; it’s a different marketplace.”
New Haven Mortgage is a non-bank lender that operates in Ontario, and Vyner said it has no plans to drop its own rates at the time.
“Our lending matrix and rates will remain the same; the institutional B-lenders may but generally I don’t suspect any non-bank lenders to follow suit,” he said. “We don’t deal direct with the homeowners, but if I were to wear the broker’s hat I would explain that our cost of money has not changed and we still have to maintain a certain spread to be profitable.”
There has been much discussion in the media about falling rates; the Bank of Canada kicked the discussion off by slashing its overnight rate, and the banks followed
by offering special promotional fixed rates and, eventually, cutting their own respective prime rates.
So with all the talk of rates, will it be tougher to convince clients to pay higher rates for private money? Not according to one broker who specializes in the space.
“It’s not a hard sell because those who apply for private mortgages do so based on need,” Shawn Allen of Matrix Mortgage Global told MortgageBrokerNews.ca. “Clients are educated and they’re smart; It’s not like an “A” client shopping for rate, it’s a client looking for a solution.”