A slowing market will grow the number of trailer fee transactions as brokers confront a spike in rock-bottom renewal rates – an effort on the part of some lenders to block switches, they charge.
“I, for one, am going to be doing more trailer-fee-option deals,” Mike Hattim, an agent with Dominion Lending Centres Forest City Funding told MortgageBrokerNews.ca. “I’m truly starting to realize where the competition really lies now and it’s not just with other brokers or the banks but with some monolines.”
Hattim is one of several brokers now pointing to clients who’ve been presented renewal offers that, in some cases, proffer rates 10 basis point or 20 off of the marketplace average.
That aggressive stance is one most brokers simply can’t match as they scout around for potential switches. The fact that those rates are being presented even before the threat of a switch means brokers are locked out of the competition before it’s begun, says Hattim.
While ostensibly that accrues to the benefit of clients, it has rubbed some brokers the wrong way as they look to shore up revenue with a falling number of new mortgages at their disposal. It’s also likely to drive up interest in trailer fees – a way of ensuring pay at renewal. Althought that won't likely help brokers through the current market slump.
They may have to lump the increased competition as lenders fight for retention. That doesn't mean they like it.
“”I guess what I haven’t thought was very productive about these renewal rate offers is that it seems as though the broker – the person who brought the client to the lender in the first place -- is now being shut out,” said Hattim. “This is supposed to be a partnership between brokers and lenders.”