Broker clients clamour for bank-branded mortgages

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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 “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 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 “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 “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.

  • Jeremy on 2011-11-02 2:11:41 AM

    Interesting... My office has no issues with consumers running to the banks for "security". If you don't educate an ill-informed consumer then yes, I can see then running away or suggesting a big bank. Educate Educate Educate! If you don't already have a value proposition, I suggest taking the time to create one, your business depends on it.

    On with the mortgage revolution!

  • David Larock on 2011-11-02 2:28:34 AM

    With all due respect, one customer does not a trend make. Selling monolines to clients should be a piece of cake for anyone who does their homework on terms and conditions.

  • 75/25 Market Share Split on 2011-11-02 3:01:01 AM

    Banks have 75% and we have 25%. There are many reasons why clients like dealing with their bank. However, I have never had a client turn down 20bps rate advantage from monolines over banks. Its money in their pocket. I agree its how we position the monolines. Believe it or not, most of the monolines have banks as major shareholders. Its an easy sell.

  • 75/25 Market Share Split on 2011-11-02 3:01:03 AM

    Banks have 75% and we have 25%. There are many reasons why clients like dealing with their bank. However, I have never had a client turn down 20bps rate advantage from monolines over banks. Its money in their pocket. I agree its how we position the monolines. Believe it or not, most of the monolines have banks as major shareholders. Its an easy sell.

  • Bruce on 2011-11-02 3:12:24 AM

    The important thing here is that the client takes out a mortgage through a broker. The worry is when clients skip the broker and head straight to the bank. As long as the broker plays a role, we can maintain and manipulate our market share. I found a good article on the relationship between brokers and Big Banks that might be worth a look -

  • David Grossman on 2011-11-02 3:31:35 AM

    John Hamilton from Dominion says “An agent is free to send 100 per cent of their deals to one of the Big Five”. That's news to me, I thought that only Scotia, TD and CIBC take deals from Brokers.

  • Angela Wong-Liao, Invis Inc on 2011-11-02 3:32:38 AM

    I believe that it is the responsibility of us, the front line mortgage professionals to educate our clients about the Mono-lines, but I also believe that the Mono-lines have to increase their profile by spending some advertising dollars promoting themselves to the general public. Yes, I have been a big supporter of the big 5 because I came from one of them, however, I also believe that we cannot put all eggs in one basket as our industry had had some bad experience in dealing with one of the big 5 before. BMO, who decided to exit from the broker channel on Feb 1, 2007, BMO only gave us, the Broker channel mortgage professionals 1 day notice, we did not get the notice from BMO not until January 31, 2007.
    As a seasoned mortgage & business professional, we have to give ourselves options and choices in running our businesses, mono-lines is other options and choices for our clients.

  • Rob Stanfield / Ottawa Broker on 2011-11-02 4:12:58 AM

    This is all interesting, as I have been a broker for 15 years and have rarely ever had a client wish to stay with their bank or evan ask about going to a bank. Then again, I don't sell rate, I sell myself as their mortage consultant and educate my clients on the lender i have recommended, so they have the confidence to make an educated decision. If you sell by rate, the client will always take the name brand they recognize. I really don't understand where the facts come from for these articles, as most brokers I talk to, their business is the same as mine. less than 5% of my business goes to the banks, and this is an estimate on the higth side.

  • Dan Beresford on 2011-11-02 5:50:05 AM

    The sad truth is mono-line lenders are invisible to the majority of mortgage clients. While the mono-lines are effective at marketing and advertising to mortgage professionals they overlook the end user. In any form of sales people do business with people they know like and trust. If a consumer doesn't know the lender the lender is at a disadvantage. Consumers have heard the horror stories of banks closing and mortgages being called or sold off for a couple of years. Even though those stories originate in other countries the internet makes it visible everywhere. A challenge then to the mono-line lenders... step up and show yourself, help the mortgage professionals market your products!

  • Gord McCallum on 2011-11-02 8:07:02 AM

    Clearly the brokers who have a difficult time advising their clients to choose one lender over another are experiencing a trust gap with the client. The client doesn't trust them enough to follow their suggestions, and doesn't respect them enough to take a recommended course of action. In fact, they're voting with their dollars. It's not a lack of confidence in the lenders - it's a lack of confidence in the broker.

  • Victor on 2011-11-02 9:39:38 AM

    I totally agree with Dan's comment. It is easy to sell Resmor as everyone with a TV has seen the amusing Ally commercials and when I mention the related association, clients like that!...But it's a different story with Merix, First National, etc. These mono-line lenders should be advertising, and in the advertisement mentioning that their mortgage products can only be accessed via their local mortgage broker. This would be excellent for the average mortgage consumer as it would boost awareness of mortgage brokers and win for each.

  • Monoline Lender on 2011-11-03 2:41:48 AM

    In regards to Bruce's comment about sending to a bank, as long as it goes through a mortgage broker. i wonder if you have heard about the situation in Australia?
    Brokers sent the majority of their business to their major banks, which closed mononline lenders and left brokers with only one option. Then, because the banks could monopolize the market they severely cut broker commission, which resulted in a major exit from the industry for a lot of brokers, who just couldn't afford to keep being a broker.
    You need to look at the big picture here. Sure, you can send your client to a major bank, because it's easy and you dont have to do much work, because TD, Scotia or CIBC has done the advertising for you. But what you've done is sold your client for a one time fee to a lender who's going to do everything in their power to ensure that client never goes back to you. Which is a huge probability because you haven't done much but just direct them to their bank as opposed to getting them the best product and becoming a trusted advisor.
    In regards to monlines advertising, I would say that's what we pay you the broker for. you're our frontline communicator to the client. You're representing us, and as such, you can communicate our products and rates, and most importantly, our customer service. I think this advice from their trusted mortgage professional is much more valuable then a flyer in their saturday news paper.

  • Ontario Broker on 2011-11-05 3:26:43 AM

    A CMHC mortgage is a CMHC mortgage regardless of the Lender. CMHC dictates the rules so it's a level playing field regardless of the Lender so my client knows from the get go I am only dealing with CMHC approved Lenders. Now the challenge is simply getting the client the best possible package best suited for their needs and not the Lender. I have only ever once been challenged that the clients wanted a Bank rather than a monoline. They changed their mind when I suggested to them they would have to sign a declaration acknowledging they agreed to pay the Bank of choice almost $6,000 more in interest over the term than the monoline Lender would have charged explaining that I didn't want any recourse on my brokerage at a later date when they realized they paid that much more. BE A PROFESSIONAL MORTGAGE CONSULTANT AND EDUCATE YOUR CLIENTS, if not then you are just another Bank Road Rep.

  • stephen codsi on 2011-11-05 4:48:51 AM

    I think some mortgage agents are creating their own problems, quite whining and get the job done.

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