It may be a reflection of economic uncertainty, but an increasing number of broker clients are retreating to the “security” of bank-branded mortgages, even if they come with a 20 basis point premium.
“I had just had a client that I was able to get a rate of 3.29 per cent with one of the mono-lines and a higher rate of 3.49 per cent with TD,” Marcus Keller, the principal broker with Dominion Lending Centres House, told MortgageBrokerNews.ca. “She rejected the lower rate and went with TD – she said she wanted the stability of knowing that the lender would still be around after a while. I would say that (broker) client preference for the banks is growing, even if we can offer them a lower rate with a mono-line.”
It’s an observation echoed by other brokers, telling MortgageBrokerNews.ca about the challenges of selling the product of even relatively well-known non-bank lenders and even in relatively large Canadian markets where brokers enjoy more than 25 per cent market share.
The phenomenon presents a significant challenge to mono-lines as they grapple to maintain originations in a slowing real estate market. It also highlights the concerns of other brokers worried that those lenders may need to up their profiles among consumers.
“Indeed, I think that there needs to be a push to educate consumers on just what a mono-line lender is,” Dustan Woodhouse, broker with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland, told MortgageBrokerNews.ca. “They are pretty much invisible to the consumer currently.
“The non-bank lenders do not do any significant advertising promoting the channel that brings them business or even of themselves. Thus in the minds of most consumers, when they hear names MCAP, Street, First National, etc., they lump them in with the heavily advertised local B lenders.”
Still, the lowest rate, and other mortgage costs,continues to be the primary focus for many clients, willing to sign with whichever broker channel lender is offering it, said Keller.
But less seasoned brokers may nonetheless find it difficult to sell mono-lines to clients even if the rate is favourable, said another industry professional, urging those young agents to curtail the number of deals they send to the banks.
“An agent is free to send 100 per cent of their deals to one of the Big Five,” John Hamilton, a broker with Dominion Lending Centres in Barrie, told MortgageBrokerNews.ca. “But I think it’s important young mortgage professionals take the time to learn about the products of the mono-lines, instead of just sending deals to the banks. I think sending more deals to mono-lines often better serves the client because of the mono-line/broker relationship. But it also allows the agent to better retain the client after the origination.”
The cautionary note comes as new media reports suggest mono-lines are increasingly challenged by the banks, both in and outside the broker channel. Two of the major banks using the broker channel effectively advanced their relative share of broker this year. That shift coincides, and may in fact be driven by the “rate wars” and a renewed willingness of bank branches to undercut broker rates.
New agents may just be following the path of least resistance, said Hamilton, suggesting they’re less able to re-direct clients who come in focused on a bank mortgage.