Banks – and not brokers -- will likely win billions of dollars in new mortgages stemming from a B.C. tax credit for first-time buyers of new construction.
Under the plan -- expected to cost the government $24 million over the next year -- eligible buyers can receive up to $10,000 back on new homes purchased between Feb. 21 of this year and April 2013.
The offer applies to all couples and single first-time buyers who have incomes of $175,000 or less. Still, there is a string attached: Their purchases must be newly constructed homes.
That simply puts brokers at a disadvantage, charge mortgage professionals.
“Brokers will gladly arrange a mortgage for a client is buying a preconstruction property,” Christopher Molder, an agent with Tridac Mortgages - The Mortgage Centre, told MortgageBrokerNews.ca. “But generally brokers don’t advertise for preconstruction financing because they simply don’t have access to extended rate holds. Because of the bank’s relationship at the sales centre, we generally don’t see a lot of that business.”
The comments echo those of other industry insiders and come on the heels of the B.C. government’s move to introduce the initiative earlier this month. The plan is meant to help kick start a faltering provincial housing sector by mitigating the effects of the HST.
Brokers continue to look for ways to gain a better in with first-timers buying directly from developers.That has been an uphill climb.
Earlier this month, MortgageBrokerNews.ca reported on what one Ottawa broker called the most overt attempt to shut mortgage professionals out of the condo development market, pointing to a builder’s email specifically demanding a commitment letter from a big bank and “NOT from a mortgage broker.”
“I fully believe this is an example of tied selling,” said Stephane Prevost, an agent with Dominion Lending Centres Alliance. “Here, my client, the buyer, is being told, in writing, first, that they must produce a commitment letter with an 18-month rate hold – something brokers can’t really furnish – and, second, that the letter has to come from one of the Schedule 1 banks and not from a broker.”
Brokers rarely encounter that demand in writing, said Prevost, concerned it represents a new level of aggressive competition between banks and brokers for clients buying “off the plan.”
While banks routinely enter into formal relationships with developers granting them access to prospective buyers looking for rate holds, brokers have traditionally been shut out of the market at that point. They instead seek to convert the client closer to construction completion. It’s a way of getting around their limited access to extended rate holds.
B.C. brokers will likely have to employ the same strategy to claim a portion of the 2,400 new purchase likely to result from the bonus program.