Industry Veteran: Broker ranks will thin

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A slowing, yet increasingly competitive Canadian market will not only cull the number of new entrants to the broker industry but thin the existing ranks by as much as 5 per cent, a veteran mortgage professional told MortgageBrokerNews.ca.

“There’s just too much competition from the banks, which have the power to squeeze us out,” Peter Majthenyi, a lead planner with Mortgage Architects in Southern Ontario, said. ”We’ve lost market share from 2008. I don’t see the industry expanding, but remaining flat and perhaps contracting 5 per cent.”

The analysis comes on the heels of a new CAAMP survey conducted in April and pointing to growing slack in the industry.  The number of consumers relying on mortgage professionals for renewals was stagnant, with 19 per cent of survey respondents obtaining that mortgage through a broker, compared to the 20 percent reporting the same in April 2010. On the other hand, the number of Canadians using a mortgage broker to facilitate a new purchase actually fell to 27 per cent from the 30 per cent of a year ago.

The story for banks was relatively unchanged, with the Big Five continuing to claim about 50 per cent of new mortgages, although their share of refis and renewals actually grew from 56 to 60 per cent over that period.

The number of people seeking broker licensing hasn’t yet reflected that increasingly tough situation. In the country’s single largest market, the number of brokers shot up 27 per cent in the 12 months ending in March. The collective number of Ontario agents and brokers now sits at 11,581.

The timing of those new entrants may be off, with CMHC economists now suggesting the number of home sales in key markets across the eastern half of the country will drop by as much as six per cent this year. Recent stats

from Western Canada are also pointing to a slowing market for new purchases in Alberta and, even, parts of British Columbia, including Victoria where new home sales fell 24 per cent in April from the year-ago period.

The weaker housing market has now encouraged many brokers to focus on finding opportunities within their existing portfolios, primarily refinances. They're also relying more on referrals. It means veterans like Majthenyi -- who relies entirely upon referrals -- have a distinct advantage over competitors relatively new to the game. That may contribute to the number of brokers leaving the business over the next year while at the same stemming the flow of bank migrations.

“As an industry, we were much more attractive to bank employees and other traditional sources of new entrants five years ago,” Majthenyi told MortgageBrokerNews.ca. "Now there’s little incentive for them to come over to the broker industry where they would lose their brand and wouldn’t be fed business.”

 

  • Angela Wong-Liao AMP - Invis Inc on 2011-05-17 4:58:55 AM

    In my opinion, the shrinking of the real estate business could be advantages to veteran mortgage professionals who have a good clientelle base and hopefully will reduce the number of new and part time mortgage professionals, especially mortgage professionals who are both realtors and mortgage brokers.

  • Elfie Hayes on 2011-05-17 7:07:06 AM

    I believe that a toughening market has always weeded out those who think this is an easy business. For those who have built a database, stay top of mind with existing clients and change their marketing to drive new business the changes will help them do more business. I embrace change and this will just make the agents who are committed to this business even better. Bring it on I'm ready!

  • David Larock on 2011-05-18 1:31:32 AM

    One point on market share that nobody seems to be making. Mortgage brokers dominated the sub-prime market which has dropped off dramatically since 2007. If we've lost share over the past couple of years, this is a big reason why.

    Our industry is overcrowded and I agree that some brokers will wash-out, but I think the market share point is somewhat overblown for the reason mentioned above.

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