Growing interest rates may ultimately make it harder for brokers to take condo clients away from a rate hold with the bank, but one leading broker is offering his strategy for stealing business away despite that changing market.
“Banks all offer cap rates, which allow banks to hold rates for one year to 18 months for certain builders,” Dan Faubert of Ottawa-Carleton Mortgage told MortgageBrokerNews.ca. “The purchaser would go and get a rate guarantee, which is usually bumped up from best rates. What I’ve done in the past is ask (the client) for their closing date and I bookmark my calendar four months before the closing date and I’ll call them and offer a better rate.”
Traditionally, big banks plant a mortgage specialist in the showroom for condo developers, allowing them the first crack at offering a pre-approval with a rate hold. Still, that hasn’t usually kept brokers from swooping in with a sweeter deal nearer to closing.
But Faubert admits that if the recent spike in fixed rates continues, it will ultimately shrink his wiggle room for besting bank rates.
“It will become harder to do as rates go up because the original bank rate may be better than what I can offer,” he said.
Not every broker shares the same strategy, however.
“The rate holds for banks don’t need to be competed with,” Stephane Prevost, principal broker at Opulent Mortgages told MortgageBrokerNews.ca. “The problem is bigger organizations are in a position to do a rate hold for an undetermined amount of time; in the broker channel, we have six months. If the rates are going up and they are able to keep the rate, it may benefit the client (to keep the bank’s original rate hold).”
For his part, Prevost believes a client can be swayed by a value proposition that isn’t driven solely by low rates.
“You shouldn’t be in the business of just offering rates: you need to offer advice, value and service,” Prevost said. “If clients are looking for that, you may be able to take the business from the bank.”