Most brokers will opt to lump it rather than leave Scotia over its 5-basis point chop, argue some industry veterans, even as others call for a boycott.
“This will definitely make it a lot tougher for many brokers especially when you take into account the slowing market and the tight lending market created by the recent mortgage rule changes,” said Angela Wong-Liao, an Invis broker sending as much as 60 - 70 per cent of her deals to Scotia. “The cut was inevitable after First National slashed compensation a month ago; we just have to learn to live with it.”
In an email to brokers on Tuesday, Scotia said that effective October 18, the following compensation rates come into force.
5-year closed term (including rental properties) 75 bps, down from 80 bps
Scotia 5-year Flex Value Mortgage closed term (including rental properties) 75 bps, down from 80 bps
Scotia 5-year Flex Value Mortgage open term 45 bps, down from 50 bps
While Scotia made headway in this year’s CMP Brokers on Lenders poll the bank fell in the medal count, with survey respondents losing enthusiasm for its commission structure, more specifically, “the transparency of that commission structure.”
Scotia, said Wong-Liao, appears to be positioning itself to weather the slowing housing market. She said the bank can well afford to risk possible broker backlash because brokers have fewer and fewer options.
“Scotia knows it will not lose broker business entirely because our clients typically prefer to get borrow from banks,” Wong-Liao said.
Another broker also expressed fears that Scotia’s move could spark a trend.
“Other banks and lenders will likely follow with their own cuts,” said Sudip Adhikari of Centum. “Banks see brokers as competition so as the market tightens they will try to squeeze us to get a bigger piece of the shrinking pie.”
Banks such as Scotia are confident they can deal with less business from the channel because they have their road reps to fall back on, he said. Still other brokers are calling for a boycott of the big bank and for brokers to focus on hawking their expertise and not just rate.