The channel may have little to fear from banks moving this week to shave 10 basis points off their five-year fixed rates, argue brokers, pointing to their competitive edge not only on rate, but on the ability to actually get borrowers qualified.
“Yes, they’ve lowered their rates, but the impact for brokers will be minimal this time,” a broker with Centum Mortgage Express in Trenton, Ont. “First, we have lenders now offering rates as low as 3.19 per cent on a five-year fixed, but also the banks have tightened up their underwriting to the extent that many borrowers can’t qualify for that rate. We, on the other hand, have the product flexibility to get them approved.”
The analysis, offered by other mortgage professionals Friday, follows the move by RBC, TD and BMO this week to trim 10 bps off their posted 5-year fixed rates. BMO is once again leading the way with a discounted rate that comes within 20 bps of the current best offer of brokers.
That narrow gap has traditionally worked to the advantage of the banks, using big name reputations to sway homebuyers. But that isn’t necessarily the case now as OSFI, CMHC and the federal government encourage the banks to further tighten their mortgage underwriting.
Banks have buckled to that pressure, even ahead of implementation of OSFI’s proposed changes to lending guidelines for federally regulated institutions.
Coming as early as June, they threaten to make it even tougher for banks to approve deals that stray from the very narrow path of triple A deals.
While brokers have been among the most vocal opponents of some of those regulatory changes, they may ultimately help them to grow their market share as more borrowers are pushed into the alternative lending sphere.
There’s some indication that trend is already in play.
CMHC latest consumer survey, released this month suggests some 27 per cent of mortgage consumers used a mortgage broker to arrange their mortgage in the last 12 months. That’s a 4 per cent point rise over last year’s 23 per cent.
“In the past year, brokers have made further inroads among mortgage renewers, with one in five relying on a broker,” reads the report. “Key reasons for using a broker continue to be getting the best rate or deal, and receiving excellent service.”
The online survey was conducted in February and March, as the banks armed themselves for this year’s fiercest battle of the rate wars. That kind of rate slashing may be increasingly ineffective if more strenuous qualifying standards means banks have to turn away borrowers attracted by the promise of rock-bottom rates.