Brokers feel the buydown heat

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It may be the broker equivalent of the canary being sent into the coal mine with early results from the Broker Sentiment poll suggesting industry players are feeling the effects of having to buy-down rate to stay competitive.

Results have been pouring in and a number of brokers have admitted their biggest concern for the industry in 2014 is reduced revenue due to decreased commissions. However, your chance to participate running out, as the deadline is quickly approaching. Get your submission in today for your chance to win a Samsung Galaxy Tab.

Early results also indicate the industry is still feeling the effects of federal mortgage regulations. And with a great deal of brokers admitting mortgage rule changes have had a negative effect on business, those same players may wonder how the others are faring so well.

Overall, however, brokers seem to be satisfied with their career choice, with the majority of participants admitting they are not considering leaving the channel in the next 12 months. Certainly, this is good news for all the homebuyers 2014 will produce.

And how exactly do brokers plan on reaching those potential clients?

Surprisingly – and despite generally being tech-savvy marketers – brokers believe the yellow pages will continue to play a significant role in lead generation, with quite a few participants admitting they are the most important tool in the marketing tool belt.  

So, have you had your say yet? Click here and spend five minutes filling out our poll to have your say – and a chance to win a Samsung Galaxy Tab.
 
  • Client of mortgage broker on 2014-02-24 1:09:52 PM

    I think that it is great that brokers are willing lower their commissions in order to get me a better rate. This is no different than when we consumers buy any product and haggle for a better price. I'm sure mortgage brokers also haggle when they buy products like cars and try to get the best deal. At the end of the day, as a consumer, I want to get the best deal possible and will shop around until I get it. If I find a better deal elsewhere, I will leave the bank that I am currently working with and jump for a lower rate. I do feel bad that this jumping around does mean that brokers do waste their time but this is no different than when you test drive many cars and leave the car salesman hanging. This is the trend today where people everywhere use the internet to get a better deal. Within my circle of friends we are not discussing how we as a consumer can now take advantage of the competitive mortgage market and get brokers to fight each other and beat each other up by offering lower and lower rates. This is the hot topic at dinner parties - how to play the mortgage market to get a lower and lower rate!!! On a personal note - I have 2.99% from a credit union but a broker is willing to give me 2.98%. This is great. Can't wait to announce this in news bulletins and chat boards! I love this country. Daniel.

  • Easy Decision on 2014-02-24 2:08:54 PM

    Haha...well the lowest rates are often paired with crippling restrictions. Will you still be high fiving your friends over the $500 in annual savings you earned with the lower rate when you are paying your $20K penalty?

    Your automobile example is valid...you chose a very specific model of car and then try and beat up as many people as you can until you get the lowest price. This only works because it is an apples to apples comparison. You will find that mortgage are most certainly not apples to apples with rate being the only variable.

    The uneducated mortgage consumers are often being taken to the wood shed by playing the "lowest rate wins" game. Expensive lesson...but at least your friends think you're cool. :-)

  • Ron Butler on 2014-02-24 2:17:50 PM

    @Easy Decision........... I can see why you don't want to use your real name. Using your real name while you insult and belittle consumers is likely not a plus for your mortgage broker practise.

    Most of the brokers advertising discounted rates take care to give every consumer full disclosure regarding the mortgage product being offered and all rate advertisers quickly get used to be constantly shopped.

    But that's why we are here; to get the consumer a better deal.

  • Paul Mangion on 2014-02-24 6:17:03 PM

    Hey Daniel. When your employer lays you off due to shrinking margins because all the consumers didn't want to pay the extra dollar you might change your tone. What is wrong with looking at the big picture and take the product thru the broker that adds the most value. That is the proper thing to do. If you only look at rate then there will be a broker to accommodate you. My question to you is when he gives the that 2.98% and you are happy with that do you commit to him or will you leverage his commitment to you to try to get a better rate somewhere else? If you do then all I can say is what comes around goes around.
    Cheers.

  • Paul Mangion on 2014-02-24 6:17:21 PM

    Hey Daniel. When your employer lays you off due to shrinking margins because all the consumers didn't want to pay the extra dollar you might change your tone. What is wrong with looking at the big picture and take the product thru the broker that adds the most value. That is the proper thing to do. If you only look at rate then there will be a broker to accommodate you. My question to you is when he gives the that 2.98% and you are happy with that do you commit to him or will you leverage his commitment to you to try to get a better rate somewhere else? If you do then all I can say is what comes around goes around.
    Cheers.

  • Paul Mangion on 2014-02-24 6:17:50 PM

    Hey Daniel. When your employer lays you off due to shrinking margins because all the consumers didn't want to pay the extra dollar you might change your tone. What is wrong with looking at the big picture and take the product thru the broker that adds the most value. That is the proper thing to do. If you only look at rate then there will be a broker to accommodate you. My question to you is when he gives the that 2.98% and you are happy with that do you commit to him or will you leverage his commitment to you to try to get a better rate somewhere else? If you do then all I can say is what comes around goes around.
    Cheers.

  • Easy Decision on 2014-02-24 9:11:38 PM

    @Ron...I don't appreciate you mocking my name. It was tough enough growing up with an unusual name and I certainly don't need you attacking me for it as well. Have you no heart sir?

  • Ron Butler on 2014-02-24 9:13:01 PM

    No heart at all for anonymous lurkers.

  • Agent on 2014-02-24 9:48:13 PM

    Paul, so what you are saying is that consumer should pay more so that people do not lose their jobs? Or are you saying that he will lose his job unless he pays more? Are you a communist? You certainly sound like one. The client should get the best deal possible. Period.

  • Mortgage client on 2014-02-24 10:01:22 PM

    I find it interesting that mortgage brokers always complain on this site. Wy can't they come to the realization that the world has changed and they no longer offer the consumer the best rates anymore. When I received my first mortgage from a broker about 7 years ago they were able to offer me .50% less than my bank. Today, the brokers cannot beat the banks. I was offered 2.99 from both Cibc and RBC in the last 4 weeks. No broker can offer this with a regular bank. Theses 2 big banks offer this 2.99 as a regular mortgage and not like they other substandard mortgages from the likes of Industrial Alliance or any ore you the broker monoline lenders. Face it. The days of the broker are numbered.

  • Broker/agent on 2014-02-24 10:06:16 PM

    The reality is as brokers, we get paid a lot of money for what we do. Even if we buy down rates to compete with banks, we still make good money. If we buy down 15bps in rate, we still make 60bps in comp. On a avg mortgage of $400,000, that is still $2400 in commissions for about an hours if work. Heck, that is better a top surgeon or lawyer. Not bad for a job that only requires 1 course at Seneca college.

  • First on 2014-02-25 7:13:36 AM

    Why do people assume that best rate = best deal? Best rate certainly CAN equal best deal but only when that rate comes with flexible terms, reasonable penalties, and most importantly, is monitored by a professional who has the knowledge and takes the time to tweak your mortgage throughout your term. The interest payments eliminated by working strategy and adapting to market changes as they happen completely dwarf these piddly 0.1% interest rate differences I hear people squawking about. And my goodness...taking a fixed rate mortgage at CIBC or RBC is complete suicide if you ever need to break it.

    We all want the best deal but I think many people are mistaken in terms of what they expect the best deal to look like. It's lazy to think that it just comes down to one variable. Take the time and do your research. Work with someone you believe has a plan and is going to be there for the long haul, not someone just pumping deals off the assembly line. Getting it wrong can be very costly so it makes sense to put more thought into borrowing hundreds of thousands of dollars than you would in selecting an interchangeable commodity. A liter of gas is pretty much the same from station to station so it makes sense to fill up where it's cheapest. If you use the same strategy when selecting a mortgage then I fear for your wallet. A good brokers job is just BEGINNING when the transaction closes, not the other way around.

  • Ron Butler on 2014-02-25 10:21:09 AM

    @ mortgage client.... I don't think our days are numbered, we will adapt, we will become more productive and eventually thrive.

    @ First..... you will find that telling consumers they are wrong, lazy and that misunderstand what they actually should want is likely a good reason not to use your real name. Since CIBC and RBC represent the largest block of mortgages in this country and all their customers are in mortal peril based on the break costs? Really, we do such a disservice to this forum putting such silly comments up.

  • Mortgage client on 2014-02-25 12:32:36 PM

    @ First....... Thanks but I do not need you to 'tweek' my mortgage. All I want from you is the best rate and information about the features that each option provides. Once I have this information, I do not need you to hold my hand. At that point, I will pick the lender who gets my business. If it happens to be a lender that you can process for me (note my choice of works "process"), then great, you can help. If I get a better deal elsewhere, then thanks for your time and I sorry that you are not able to provide me with the best product to meet my needs. I gave you a shot but you cannot compete with the likes of CIBC and RBC. Oh, on your point that I'm screwed if I decide to break my mortgage, I am equally as screwed if I use your monoline lenders - you know the ones that only allow porting if done the same day. Of all the posts that I have read here, it seems that Mr. Ron Butler is the only one that is a realist without his head in the sand. He must have a successful business as he gets it (unlike the other guy Paul above who says a consumer should pay more than necessary otherwise they will lose their jobs. Does the word Socialist mean anything here?).

  • Paul Mangion on 2014-02-25 1:20:16 PM

    @First. It is quite obvious you are a rate shopper and would buy the cheapest of anything you want. I have said before I prefer not to deal with the likes of you and have commented how the likes of you and the business's that service you are the cause of the degradation of society. Maybe the bank could pay a better wage if they didn't have so many customers like you. I don't understand how I am a communist because I like to support local business's or by Canadian made clothes or cars or shoes and reward the people that serve me fair pay for their services. If more people thought like me all of us would be better off. One thing I can tell you for sure is my business and life style is better without people with your attitudes. Like I said before. There is a customer for everyone.

  • Ron Butler on 2014-02-25 2:24:21 PM

    @ Paul, I respect you for putting your name on your posts and you are clearly a successful broker. I would honesty caution you for attacking a consumer for being "a rate shopper". In financial literacy courses everyone is taught to be a shopper. Every course offered in this country puts that front and center. It really should be front and center. It is important to get multiple quotes for goods and services. It just makes sense and we should not attack it.

    So, as much as "rate shopping" is painful for commission based persons we must respect it as the consumer's best practise.

  • Paul Mangion on 2014-02-25 2:55:20 PM

    Ron. I am not attacking this consumer. I am merely stating my opinion. You and me both have very different models and that is ok as there are customers for both of us. Probably more for you the way things are going. But to say I am a communist because I dislike his decision making process is silly. You can't honestly tell me you haven't had clients make decisions solely on rate and regretted it. I have been in this business long enough to know most people get exactly what they deserve. Besides, this is just a cycle the banks go through that wont last and if I was really communist I would take away his choices and tell him what to take. Happy selling Ron.

  • Ottawa Broker on 2014-02-25 7:43:13 PM

    This site and blogs have become a joke.
    I hope as brokers we would just stop using this site. This is the first time I have been on it in about 6 months and it is the same crap as before. It makes us look unprofessional and foolish. This site has done nothing to help the mortgage brokers image, it has tarnished it.
    Stay off this site and it will eventually go away.

  • Maurice Sinclair on 2014-02-26 5:17:54 AM

    It is pretty obvious that Ron Butler is also the "mortgage client" making the case for rate shoppers. He caters to that client and his business model hurts the rest of us. But I know he has no shame.

  • Ron Butler on 2014-02-26 11:25:24 AM

    Well Maurice, I don't know you but you claim you know me siting my lack of shame so I can only assume the name you are using is a fake. It's a bit sad that when someone does not agree with you they accuse you of lies and base manipulation but that seems to be the way of the web these days, endless accusation and recrimination. Look, I get it, commission discounted mortgage rates anger people who don't want to discount. It makes you mad to have someone disturbing deals that were in place, creating havoc with pipeline movement to look for better rates. To that extent it is hurtful. I really do get it. I am biased to my business model, naturally I am, but I get the chaos it can cause for others. Still, RBC and CIBC road reps sell 2.99% 5 - year mortgages every day. It's just the new normal. Change will come whether it hurts or not.

  • Paul Therien - CENTUM on 2014-03-04 12:00:37 PM

    The practice of buying down rates is not a new one, and in truth it is likely not to go away anytime soon. Any broker who practices this does so based on their own choice on how to provide value to their customers. Our reality is that we as an industry build our businesses competing on rate.

    For those that have been in the industry for more than 15 years you will all remember the glory days when brokers had lower rates than the banks at least 80% of the time. It was, for the vast majority of brokers, a calling card. "We can beat the banks"

    Yes the industry has matured and changed, but it does not mean that most consumers are rate sensitive. It is up to us to educated customers on the finer financial details of what being a home owner entails.

    If a broker chooses to spend part of their commission to buy down a rate, that is their choice. It is their business and they have that right. Will this model of business be sustainable long term? Who knows? Maybe it will - maybe not.

    Arguing and name calling on a public forum changes nothing, and it certainly does not benefit our industry.

  • Walid Hammami - Hypotheca on 2014-03-08 5:26:40 PM

    A rate war between brokers and lenders for the consumer's eye will end up hurting consumers.
    If the payday for brokers is not worth it they will leave the market place and guess what is going to happen ? No brokers no reason for lenders to offer lower rates and whoever is left standing in the brokerage business will die shortly after because lenders won't feel under any obligation to provide them with good rates.

  • Increasingly Informed on 2014-03-09 10:45:26 AM

    As a consumer, I really believe that Ron Butler gets it. There are far too many sanctimonious and pseudo self-indignant brokers that have low volume shops (hence can't get the same funding rates ) and can't get the same rates as the rate conscious operations of brokers like : TNM, Butler Mortgages, Advent Mortgages, DLC, Scotia, RBC etc... Many consumers know how to read the pre-payments "privileges", the cost for breaking a mortgage ( 3 months interest or the rate diff. calculation - whichever is greater - many online calculators for this !) and we don't want your free cup of coffee, fridge magnet, so-called value added service (for referrals for your buddies ) and pretend like you are the impartial provider of knowledge - like we must be humble for your ability to disseminate quasi-basic mortgage particulars.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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