Some brokers critical of BMO’s low-rate no-frills mortgage may be forced to rethink that position, with one channel lender offering a similar trade-off, albeit with a longer amortization.
Xceed is betting its 3.24 per cent on a five-year fixed is enough to woe brokers looking to satisfy rate-conscious clients with a mortgage not unlike that BMO no-friller. Xceed’s product launched this week offers amortizations up to 30 years as well as 90-day rate holds.
The rub comes in the form of 10/10 prepayment privileges and full prepayment options, with penalty, only at the time of a sale or a refinance with Xceed.
Those last points may turn off some brokers now offering rates as low as 3.29 per cent for full-featured five-year terms. But Xceed is gambling that rate is out of reach for enough of its select group of broker-partners to help its 3.24 offer gain traction.
“Our research tells us that some, but not all, brokers can access 3.29 per cent,” said Michael Jones, company president and CEO, and “all brokers, who are signed up as Friends of Xceed, have access to the 3.24 per cent rate without any need to buy it down.”
Minimum volume requirements means some of Xceed’s broker-partners have effectively been shut out of that 3.29 per cent offer through other lenders. They’re now faced with the question of whether to buy down in order to win their clients that rate on a standard-options mortgage or to go with Jones’s offer.
For some, their own compensation may figure into the deliberations.
While they don’t have to buy down in order to access 3.29 at Xceed, the lender has lowered broker compensation on those deals from the 135 basis points they now earn for arranging its standard mortgages to 90 bps.
“Obviously for such an attractive rate, we cannot afford to pay brokers the same commission that applies to our standard posted or XtraGreen products, but we think that the 3.24% rate with 90 day rate hold, 10/10 prepay and full prepay (with penalty) allowed for sale or refi with Xceed, should be attractive to brokers and their customers,” Jones told MortgageBrokerNews.ca.