Monolines surprised by rate; clients curious

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Reports of Investor Group’s recent 1.99 per cent three year variable rate “shaking” the industry weren't exaggerated, with lenders being caught off guard and scores of clients inquiring about similar products.

“I’ve had seven people email or call me about the offering and asking if I can get it,” Jake Abramowicz of Mortgage Edge told MortgageBrokerNews.ca. “When I showed my one client the limitations it was enough to scare him away, though.”

Investors Group’s rate -- a 36 month closed variable-rate mortgage at 1.99 per cent (at Prime – 1.01 per cent) is unparalleled at the moment but, according to Abramowicz, each of his clients has opted to avoid it due to the inability refinance the product.

 “The product is a fit for someone who knows 100 per cent that they will not move and is 100 per cent sure rates will not move,” he said. “If someone can accurately predict the future they should take it – it’s a great rate.”

However, he realizes it’s the sort of promotion that will feed the insurance and investment arms of Investors Group.

Still, even Abramowicz admits he believes rates will remain steady for the years to come – which has forced him to question why monolines haven’t employed a similar tactic to drum up interest in the broker channel.

“If a monoline did this they would be very smart; they would gain a massive market share,” he said. “I spoke to a few today – MCAP, RMG, CMLS – and they were as surprised as the rest of the industry.”

And although he can’t compete with it, Abramowicz has found the silver lining.

“The positive is that I spoke with seven clients who I otherwise would not have,” he said. “I’m just hoping this will wake up the monolines to be more aggressive with variable rates.”

Related:

Brokers lambast IG offering
Mortgage product re-ignites mortgage wars
  • Len Lane on 2014-05-15 10:54:28 AM

    I'm amazed at how concerned we are about mortgage lender who would have trouble probably making the top 25 or maybe even top 50 mortgage lenders in Canada. Their share is minimal and we are fueling their advertising gimmick by even talking about it.

  • Kevin R on 2014-05-15 11:11:25 AM

    IG are not a huge volume lender, go let them fill their boots, in 3 weeks their handful of underwriters will be so buried, good luck & God bless getting an approval done in 3 weeks, let alone meeting financing condition dates in 4-5 days on purchases. No thanks.

  • Russ on 2014-05-15 11:47:55 AM

    No one should buy shares in IG, Just ask yourself what is their net return on these funds..they will join the others who have mismanaged their finances..but you have to admit its ok for the mortgage customers.

  • Dave, Broker on 2014-05-15 12:07:07 PM

    Just remember ...IG is the Kmart of financial planners....

  • Mel on 2014-05-15 12:18:43 PM

    The only reason brokers are knocking it is because they can't sell it. If this product was available to brokers, they would be selling it for sure! melbeersfosters@gmail.com

  • Ron Butler on 2014-05-15 12:28:35 PM

    I am not mad at IG I have nothing bad to say about this company. The product has issues I have discussed before. Bottom line is if the client is sure he will live in the same house and not need any form of change in his mortgage for 3 years, not need a SLOC and likes the idea of making his payments based on a much higher rate the 1.99%; then I say take it, it's a great deal and I think it will be gone soon.

  • Kevin R on 2014-05-15 1:05:59 PM

    @ Mel
    Most good brokers aren't knocking the product so much as questioning the ability to service/underwrite the huge demand the media hype is giving them. IG use Financial Planners to sell their mortgage products & I wouldn't call that as having proper qualified handling of peoples largest purchase they make in their lives. If one of my clients is buying a home & has a condition date next Tuesday wants that product, I tell them to go have at er. I tried to phone them yesterday to get details on the product & after an hour on hold, I just gave up. Probably a great product if there is no urgency in getting the mortgage or needing the $$$.

  • Victor Simone on 2014-05-15 2:19:56 PM

    I think knocking IG professionals is a bit unfair. As a past London Life agent many years ago, they have some of the best training in the industry. IG and London Life are part of the same Power Financial Group and they are certainly not the bottom of the financial advisor food chain. Judging by recent publications by FSCO this past week, the failure rate from Primerica is the worst in the market. IG has a decently trained group of pros.

    Having said that, they don't know mortgages. Add to it that the investment clients will scream bloody murder if they ever need to break this mortgage offer and the IG advisors will be slaughtered. An IG advisor will be fairly upset to lose investment clients from badwill on a mortgage penalty.

  • Ron Butler on 2014-05-15 2:25:42 PM

    @ Victor Good point and well said. Perhaps the advisors will be pretty tired of speaking to mortgage rate shoppers by Friday, they may find it is not the fabulous cross sell opportunity they thought it would be.

  • Ottawa Broker on 2014-05-15 4:03:09 PM

    The IG financial advisors will not be selling the product, if they have a client that is interested in it, the client gets turned over to the mortgage specialist at IG. All the mortgage specialist does is do mortgages for the financial advisors clients. That being said, the mortgage specialists for IG in Ottawa, or at least the majority of them, are former mortgage agents that used to work at a mortgage brokerage and couldn't make it, so they took the salary/commission, arranged relationships with financial advisors that the IG program offered. I for one have come across the 1.99% about 6 times this week and have not lost a single deal after offering a professional and knowledgeable explanation. I really don't see what all the hoopla is about. Weak lender, weak mortgage specialists, nothing to worry about.

  • Brian on 2014-05-15 5:02:57 PM

    I am pretty sure I know the answer without asking the question....but just in case....does anyone know if they are making it available on investment/income properties ? or is it strictly principle residence financing ?

  • Chris on 2014-05-15 6:04:15 PM

    Hey Brian, it is available on revenue properties as well. That is what an IG Financial Planner told me today.

  • BC broker on 2014-05-16 12:06:52 AM

    Actually, IG doesn't really use mortgages to attract new clients, they are more interested in trying to get all their existing investments clients to have IG mortgages.
    They are a financial planning company and not interested in only doing a mortgage.

  • Daniel McKay on 2014-05-16 12:50:20 PM

    @BC broker: This product is at loss leader pricing so it would make no sense to offer it to existing clients, when you are effectively losing money on the mortgage. In fact, internal refinances are not eligible for the heavily discounted rate.

    As far as angry clients threatening to transfer or liquidate their IG investments, that is not much of a concern to them as others have pointed out that most of their mutual funds have Deferred Sales Charges payable when that happens.

  • Michelle Brienza on 2014-12-30 11:32:50 AM

    This product was out earlier this year and I had 3 clients inquire about it. This product has all kinds of sliding scales inside at underwriting. Only Triple A clients with zero blemishes get this offer. If ratios are tight, they will increase the rate by .25%. This happened to one of my clients. And another client got declined. It's got good features and the right rate for the right client. This is not a product for everyone. Also, they usually carry the mortgage for 3 weeks and then remove the product when their money is done. Underwriting/turnaround is anywhere from 5-7 days. it's brutal.

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