“Unfortunately you do have to issue preapproval letters but any time you put a rate on a piece of paper you are a sitting duck. I don’t know how to avoid that because many customers and Realtors want to see the preapprovals,” George Christopoulos of the Mortgage Centre told MortgageBrokerNews.ca. “The only way around it is if you build a relationship with your client where you say, this is today, ‘this is the highest you’ll pay but if the rate changes when you have an actual deal we’ll lower it for you.’”
Christopoulos, who says clients often use preapproval letters to negotiate rate with other lenders, also covers legal fees if the situation warrants it, as well as taking small commission cuts in a bid to encourage clients not to rate shop.
“It comes down to commissions; many of my customers are repeat customers who refer me and I don’t mind going a little bit deeper and taking a small cut to maintain the relationship,” he said.
According to CAAMP
’s annual mortgage industry report, released in November, mortgage broker share has shrunk, year over year, with much of that lost business being absorbed by the big banks.
For all mortgages purchased up until the release of the survey, 61 per cent were funded by a bank. Meanwhile, brokers only accounted for 31 per cent market share.
In 2013, up until the date of that year’s publication, banks accounted for 42 per cent of mortgage market share, while brokers accounted for 40 per cent.
And these statistics are worrying mortgage brokers.
45 per cent of those who participated in CMP’s Broker Sentiment Poll – set to be released this month – admitted they are worried about shrinking market share.
But there are ways to win back that business, argue savvy brokers. One key is to focus more on alternative deals.
“Competing with banks is getting very difficult because they’re matching discounted rates that brokers are offering. I’ve had it many times when banks will break their own rules to get a client something they wouldn’t normally approve it was submitted on the broker side, which is extremely frustrating,” Anson Martin of Verico
Fair Mortgage Solutions told MortgageBrokerNews.ca. “Fortunately, in my case, a lot of my work is spread out; it’s not just A-work. I don’t have to deal with it as much as brokers who only deal with A-work. I don’t have to worry too much about competing rates.”
It may be a controversial tactic, but one broker has admitted to using it to discourage clients from shopping for rate at the big banks.