Our story starts with a broker who contacted MortgageBrokerNews.ca with an axe to grind. He’s considering leaving the industry as a result of dwindling renewal business. Lenders are becoming more aggressive at renewal time and offering rates he couldn’t compete with, he said.
“What we do is bring business to lenders, obviously, and what they’ve been doing is at renewal time is offering (clients) rates we couldn’t possibly match,” the broker, who spoke with MortgageBrokerNews.ca on condition of anonymity, said. “They offered rate guarantees for seven months. The most we can get is 120 days. So they were pricing us right out of business.
“The only way to compete is they know the most we can do is drop a rate by 15 basis points.”
The broker, who has nearly 20 years of industry experience, claims his income has been cut by 35% as a result over the past two years.
But does this broker have a leg to stand on?
, a broker with Dominion Lending Centres
, doesn’t think so.
“I think that’s a broker who fails to understand the nature of the business we’re in, because we are paid for an introduction. We’re paid by the lender to bring that client to the lender. Period, the end,” he said. “You aren’t bringing the client to the lender for 1,2,3,5 years but to make the introduction. A lender doesn’t really earn anything of substance in that first term of the mortgage; their whole core of their business is based on that second and on the third term.”
Lenders who contact clients at renewal are doing so to cover their bases, Woodhouse argues. And that’s just good business.
“If they don’t get that renewal at the second term it hammers their books big time … it’s a two-way street,” he said. “The lender is running a business as well and they need to retain that client in order to be there to place another mortgage with them.”
The competition is healthy, according to Woodhouse. And all is fair in love, war and, of course, business.
After all, brokers are free to put up their own fight at renewal.
“As far as beating them to the punch, Scotia
goes after the clients at the six month mark, most lenders go after clients at the 120 day mark – we all know that,” he said. “I reach out to most of my clients six months out to be ahead of the curve. But I don’t think that’s anything special.”
Speaking from the lender perspective, Elaine Taylor, vice president of sales at MCAP
, says it’s in their best interest to try to service the customer at renewal.
“There is a process that says within a certain number of days before the expiry of the mortgage, a lender would reach out to see if the customer has been serviced,” she said. "We don’t know who has and hasn’t been contacted by the broker.
“We have to understand it should be win-win-win; a win for the customer, a win for the broker and a win for the lender, whoever that happens to be,” Taylor continued. “If (the broker) did a good job they would expect the deal to come back.”
Competition may be ramping between brokers and lenders for client business at renewal time. We spoke with two brokers and a lender to get a sense of how that delicate process is navigated.