How to take a larger slice of the renewal pie

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It may be a controversial tactic, but one leading broker has established a rate buydown system specifically tailored to switching lenders at renewal. Dustan Woodhouse of Dominion Lending Centres explains.

With around 1.1 million privately owned properties in B.C., about 50 per cent of which have mortgages on them, there are arguably more than 100,000 renewal transactions up for grabs in my home province each year. This is a significantly larger market than purchase transactions, and one with far less pressure and much longer lead times than most refinance and purchase transactions tend to entail.

Nice work if you can get it.

That, for me, has been the challenge since day one. The statistics we often hear are that lenders retain around 70 per cent of existing clients at the time of renewal. One popular broker lender boasts a current renewal retention rate of 91 per cent.

In other words, this is not an easy nut to crack.

As a broker starting out in 2008, I knew the above numbers, all of them, yet still made initial efforts to win some renewal business as the opportunity arose. However I quickly learned that in the 11th hour, in particular once the payout statement was ordered, lenders would get far more aggressive than the market rates offered in the initial renewal letters sent to their clients. Many clients would wind up sticking with their existing lender at that point. The time, and often the money I had invested in the file, was all for naught.

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  • Jim Tourloukis, Advent on 2015-03-23 2:11:49 PM

    Hi Dustin
    Thanks for sharing your approach. It is very interesting to actually get in front of the deal as you do and put the onus on the client to review with the lender directly. We actually do a similar thing when a potential client calls us requesting a rate. However, we do not send them a letter nor do we spend much time with them (at most 7 minutes is all they get at this point). We tell them to shop around and only come back to us once they have done so. It eliminates much of the wasted time.
    For renewals, we have had tremendous success retaining about 75% of past clients at renewal. However, we have only done this in the past year and a half (we never focused on past clients until we re-joined Verico in 2013 to use their CRM tool). The key here is the lenders which you do business. With some lenders you have no chance at all at renewal. With others, it is pretty simple to retain. You just need to know how to approach the deal depending on the lender at play.

  • Jim Tourloukis, Advent on 2015-03-23 2:13:42 PM

    oops. I meant Dustan, not Dustin. Sorry

  • Ron Butler on 2015-03-23 6:56:18 PM

    Jim makes a great point: know your adversary! Some FI are easy to take renewals from and some are totally hopeless. Several banks will go to the wall to hold on to a client and you have to know where to direct your energy.

  • Ottawa Broker on 2015-03-23 8:36:59 PM

    I find it interesting that the article won't name the lender that brags about a 91% retention rate with renewals. I am assuming the lender spends considerable money advertising in the magazine so they won't be named because brokers would think twice about using a lender that has a 91% retention rate at renewal.
    Myself, about 90% of my business goes to lenders that pay at renewal and that way the clients are not dragged through another approval process every 5 years.

  • Arbitrage on 2015-03-24 8:37:02 AM

    @Ottawa Broker - it's almost certainly First National. Our BDM used to brag about it for some inexplicable reason. I wonder if he noticed the dramatic drop off in business after those sessions. I'm with you on the renewals. I have been able to average 70% renewal lender over the last 3 years and simply can't understand the thinking behind brokers not making this strategy a primary focus of their business. There are enough quality renewal lenders today that neither you nor your client are sacrificing anything by supporting them. If they make competitive offers at renewal the client stays, and we get paid. If they don't then we hunt for greener pastures and again get paid. In either scenario I feel that placing clients with a renewal based lender is better for them (no undue pressure or influence from some brokers to move at renewal), better for me (working with lenders at renewal, not against them), and better for the lender (a renewal is significantly cheaper for them than a new origination). Healthy for the client and the industry as a whole IMHO.

  • Scott Tremblay on 2015-03-24 4:22:18 PM

    I like the strategy. I have been moving this way, and may consider the letter approach. If brokers move toward the Renewal/Trailer models as first choice the pressure will be on non renewal model lenders to follow what we are looking for or struggle going forward. Already seeing the shift. Great for client, lender and broker.

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