RBC and brokers in the same boat?

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Rising revenue, but dwindling profits. It’s the primary challenge facing Canadian mortgage lenders and brokers, and now new results suggest RBC is no exception.

The biggest of Canada’s big banks saw a 7 per cent rise in mortgage funded volume during the second quarter compared to a year earlier.

At the same time, its net interest margin fell a full five percentage points over the same period as the bank dropped rates on its 4-year fixed to return fire on BMO at the height of the rate wars in March.

The financials for the three months ending April 30, reveal the extent to which RBC and other mortgage lenders are now having to work harder in order to maintain current levels of profitability. That’s despite average origination numbers that have continued to climb, driven by double-digit growth in the GTA.

Brokers are increasingly finding themselves in the same boat as a growing number sacrifice commission in order to land deals in a fiercely competitive market.

There’s growing suggestion from some players that readjustment of commission structures may be inevitable for mono-lines and other smaller mortgage lenders grappling with tighter spreads. It is, however, a suggestion most brokers continue to reject.

“The model in its current state needs to be revised and there is a sense of urgency here,” John Bargis of Mortgage Edge told MortgageBrokerNews.ca. “Having said that, there needs to be careful study about the way going forward because in many ways what’s being considered is like a tax -- once implemented, it’s hard to reverse.”

Still, RBC and BMO, which trod out its own results Tuesday, are committed to actively growing their market share, with latter refusing to rule out another round of its 2.99 per cent interest rate on a five-year fixed.

The introduction of that rate would set off another battle in the rate wars, caution analysts, suggesting mono-lines would most likely take the brunt of any casualties.

 

  • Joseph Trombetta on 2012-05-25 5:55:09 AM

    The two Banks that are fighting to increase market share, are not being social responsible to our mortgage market. Especially the first time buyers that need maximum amortization to qualify. The rate wars is about winning the " rich clients ". But that is my humble opinion.

  • Competition. on 2012-05-26 3:15:05 PM

    Competition is good. Let the best mortgage service provider and price win. Customer will determine whether tobdeal with you or not.

  • Derek Rowley on 2012-05-26 8:14:23 AM

    In regards to Broker's/Agents sacrificing commission to land the deal, in the going on 13 yeras I have been an agent, i have yet to do a buy down nor will I bow down ever.I tell my clients that like them, I have a mortgage and a family to feed and ask them how would you like it if your employer asked them to forfeit half their paycheque. Be assured their union would form a strike line so fast. Why should any broker/agent have to sacrifice commission for doing a good job?

    As for mono-lines and their commissions, if these lenders would band together and move forward against the Big 5, it wouod be a win win for the lender, broker and client. Does the word greed mean anything to ya Billie?

    Let the banks fight it out and once they have killed themselves we can then move in for the spoils.

    Just my opinion

    regards

    Derek Rowley

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