Are banks telling clients to rate shop?

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Brokers having to deal with flighty rate shoppers is nothing new, but one broker’s recent experience suggests banks may actually be encouraging that bold behaviour.

“This just came up a couple weeks ago – a client came to me to apply for a mortgage and they had already spoken to the bank,” Mike Celuch of Mortgage Intelligence told MortgageBrokerNews.ca. “The bank told the client to go see a broker, find out what rate they will offer and that they’d match it.”

Celuch lost that particular client’s business. Though he has, in the past, been able to earn the business of rate shoppers.

“If I know upfront that that’s what the client is doing I’ll just say to them, ‘here, this is the rate I’ll offer, but I’m not going to waste my time for nothing,’” he said. “’If you want to stay with me I’ll give you the best rate I can.’”

With the prevalence of rate comparison websites and aggressive promotional campaigns from the big banks, brokers have to deal with rate-focused clients who are intent on shopping around until finding the best rate.

Some brokers have combatted this by asking clients to sign commitment letters. For his part, Celuch uses them on a case-by-case basis.

“I do have a form that, if I think a client is using me, I get clients to sign but the problem is how enforceable is it?” he said. “It’s similar to a contract that real estate agents us; it’s a broker agreement that states they are applying for a mortgage for X amount of dollars, and the client expects the commitment. If they cancel I am entitled to a fee of X amount of dollars.”
 
  • David Larock on 2015-05-05 9:44:02 AM

    When I hear this from clients, here is my response:

    "Your bank doesn't want to have to offer you a competitive rate unless you force them to by doing a ton of extra work and by wasting someone else's time. If you follow their direction and ultimately reward them with your mortgage business, you are validating this approach, and I don't know about you, but as a loyal customer I would find it offensive".

    Once I say that and we get done talking about the Bank's terms and conditions, these clients rarely have any further contact with their bank rep.

    Banks who use this approach are effectively handing you their clients on a silver platter.

  • Tony Romano on 2015-05-05 9:45:11 AM

    This sounds interesting and fair as a concept, but is it enforceable? I'm not a broker so I'm just wondering.

  • Craig Pritchard on 2015-05-05 9:56:20 AM

    I would have to agree with David Larock, well said.

  • Craig Pritchard on 2015-05-05 9:56:41 AM

    I would have to agree with David Larock, well said.

  • John Greenlee on 2015-05-05 9:59:59 AM

    David took the words out of my mouth.

  • Omer Quenneville on 2015-05-05 10:32:40 AM

    Banks rarely beat rates, they just match rates and while I say something similar to what David above says. I also add that if the bank only matches me, they are stealing you back, if they beat my rate, I welcome you to go back. I have this conversation with every client before I begin the process so they understand where I am coming from.

  • Dianne Chafe on 2015-05-05 10:53:03 AM

    Yes I always get the client to admit that if my rate is better than what the bank gave them the first time then I have earned their business. If they are not willing to give me their word that they will work with me if my rate is better than I do not waste my time.

  • George Christopoulos on 2015-05-05 12:40:28 PM

    Brokers have been doing that for years.
    First person to play their hand is ripe to get under cut.
    But as the bank is matching the rate ask them about penalties.
    That is the tipping point.

  • YYCBroker on 2015-05-05 3:00:39 PM

    I agree with the above comments, however the tactic we use is to have a dialogue with the client to the effect that if the bank doesn't value their business enough to quote them their best rate up front, and will only match their broker's rate if forced to, how much do they value the client's business and do you really want to deal with that type of lender. Ultimately, the tipping point is also to discuss the bank's prepayment options and method of calculating penalties. That is a winner for the broker in almost every instance.

  • Brian Matthey on 2015-05-05 4:31:44 PM

    Agreed with all the above-been doing this for 25 years-

    I always ask the client up front-Where do you bank?Have you approached them?What did they say? If they say the rate match game I will normally add "How many years have you dealt there and then add they must not value your business and have a lot of time to give you because you are spending your time,your gas and your energy to do their job.You obviously don't deserve the best rates in their eyes.How does that make you feel?Don't you think they should offer you their best rate,up front?Obviously they don't think much of you

    Has the Bank ever discussed a mortgage strategy with you or do they not have the time for that either? I would think they want you in this mortgage for as long as they can.Makes them more money- But there are several ways to save money that they don't want you to know.

    Have you ever paid a penalty on your mortgage?Have they ever explained to you how they calculate that penalty to their advantage.

    I could go on and on but many of these questions will open a door or two to shut down the bank's approach but my final statement is normally the go ahead or out the door and no more wasted time.

    Now you have a choice to make because I don't get paid for giving you advice.I don't get paid for using my years of experience to help you get the best overall package from a lender,now and into the future.I don't get paid for being your advocate.I only get paid when I process your mortgage.I haven't wasted your time telling you to shop but I cannot waste my time investing in you only to have you return to your bank.Do you want me working for you at no cost,now and in the future or do you want to reward your Bank for treating you like they have?

    I wish more banks would use this approach and give us a shot at every client they send shopping!

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