Broker miffed by rate shopping advice

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A recent article on a wide-reaching personal finance magazine plugged the benefits of rate shopping; but did it ignore some important pieces of the mortgage puzzle?

“Want to save more than $53,000 on the purchase of a home? Then be prepared to comparison shop for the best mortgage rates and terms,” a recent MoneySense article reads. “According to a new RateHub.ca survey, consumers that shopped around for the best rates saved $53,089 (based on a $500,000 mortgage, amortized over 25 years)—the difference between a lender’s posted mortgage rate and the discount rate, over a five-year term.”

According to the article, clients who shop around save an average of 2.23% by using the popular rate site, which amounts to over $50,000 for a $500,000 mortgage.

And while brokers acknowledge rate shopping helps homebuyers save on rate; it could cost them in the long-run. Something the MoneySense article fails to mention.

“I think people tend to focus on rate because it’s one of the few things they understand when it comes to getting a mortgage,” Mike Maguire, a broker with Mortgage Wise Financial told MortgageBrokerNews.ca. “Rate is not the be-all and end-all; terms matter as well.”

Those terms could include hefty penalties that cost clients thousands, Maguire said.

“What will really save clients money is finding someone who will take the time to meet with you and understand your wants and needs,” Maguire said. “My opinion is clients should deal with someone who has their best interest at heart.”

That opinion is echoed by Alyssa Richard, founder of the aforementioned RatebHub.ca.

“Online doesn’t replace the need to speak to financial experts,” she told the Ottawa Citizen, “but it does empower you.”

That message is sometimes lost, however, in the mortgage information overload from personal finance sources that often seem to focus solely on rate.
  • Mortgage Pro on 2016-01-15 9:50:12 AM

    The long and the short of it is that once you know what the best rate (and terms) are you can get it just about anywhere. Then the differentiator becomes service and what else can I get (like free banking, premium on investments, better rate on a credit card and yes,...even a toaster).
    Difficult to compete with the deep pockets of the bank that can create long lines of loss leaders to capture the mortgage client.

  • Tony Piattelli on 2016-01-15 10:18:58 AM

    I've been doing this job for almost 30 years, and I can tell you that this information is misleading on many levels as it obviously didn't take into account the savings had the client gone with a variable rate mortgage versus a fixed rate mortgage over the past 5 years, so if you're going to compare the lowest rates in the market place, then use the lowest rates, which in many cases isn't the 5 year fixed rate. ADVICE TRUMPS RATES EVERY TIME. Of course if you don't take the time to understand the client's objectives or needs, then selling rate becomes the default as it's easy.

  • Ron Butler on 2016-01-15 10:21:55 AM

    Strange comments, online mortgage brokers currently beat every bank in Canada on every single rate.

    Also, I cannot understand how you can can believe the best rate and term is available "just about anywhere". Rate offers from most brokers and all banks almost never match the lowest online rates.

  • Nick Mitskopoulos on 2016-01-15 10:52:11 AM

    Indicating to clients that the savings are based on a rate spread of over 2% is totally misleading and fraudulent. Showing a client the benefit of your rate by comparing to a posted rate is not reality in today's marketplace.

    So what if bank's advertise posted rates. Mortgage shoppers are never going to accept the posted rate, so why compare to that.

    People in industry should stop using posted rates as a comparison to their discounted rate when discussing the savings but only when comparing penalty calculations.

    This method of rate comparison is misleading and not a good representation for the brokerage industry.

  • Christopher D on 2016-01-15 1:16:23 PM

    Did we not notice that the original article compared a posted 4.64 rate with the best discounted rate in the market?? Good thought out advice should always be the key, and that article was as useful as telling me junk food is bad!

  • Susan Taylor on 2016-01-16 4:16:20 PM

    MoneySense Magazine is notorious for completely discrediting the value of any professional service provider. A recent edition featured an article titled "what your realtor isn't telling you". Why so negative? Why not a balanced headline like "Questions to ask your Realtor." I had been an avid reader of this magazine since it hit the market 20 years ago. But over the last few years, their editorial bias against professional services has just made me mad. It's just plain irresponsible.

  • Gerry on 2016-01-17 2:12:00 PM

    I concur, it never is about rate, it's about what the client is looking for and satisfying those requirements with good sound advice from a mortgage expert. To compare the savings over a posted rate to a discounted rate insults the intelligence of a client, bad article.

  • Mortgage Delivery Guy on 2016-01-17 2:36:20 PM

    Caution folks! Mortgage rate alone as a primary criterion could be a serious mistake on a mortgage.Comparison with more details on the terms and conditions along with the rate should be the strategy in my humble opinion.

  • Mortgage Pro on 2016-01-21 11:16:54 PM

    Come on Ron. There's published and unpublished rates. Today's online consumer is increasingly using the information from the so called lowest online rate offers to shop rates and, YES pretty much obtain that rate or better "just about anywhere"

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