Are banks telling clients to rate shop?

Are banks telling clients to rate shop?

Are banks telling clients to rate shop? Brokers having to deal with flighty rate shoppers is nothing new, but one broker’s recent experience suggests banks may actually be encouraging that bold behaviour.

“This just came up a couple weeks ago – a client came to me to apply for a mortgage and they had already spoken to the bank,” Mike Celuch of Mortgage Intelligence told “The bank told the client to go see a broker, find out what rate they will offer and that they’d match it.”

Celuch lost that particular client’s business. Though he has, in the past, been able to earn the business of rate shoppers.

“If I know upfront that that’s what the client is doing I’ll just say to them, ‘here, this is the rate I’ll offer, but I’m not going to waste my time for nothing,’” he said. “’If you want to stay with me I’ll give you the best rate I can.’”

With the prevalence of rate comparison websites and aggressive promotional campaigns from the big banks, brokers have to deal with rate-focused clients who are intent on shopping around until finding the best rate.

Some brokers have combatted this by asking clients to sign commitment letters. For his part, Celuch uses them on a case-by-case basis.

“I do have a form that, if I think a client is using me, I get clients to sign but the problem is how enforceable is it?” he said. “It’s similar to a contract that real estate agents us; it’s a broker agreement that states they are applying for a mortgage for X amount of dollars, and the client expects the commitment. If they cancel I am entitled to a fee of X amount of dollars.”
  • David Larock 2015-05-05 9:44:02 AM
    When I hear this from clients, here is my response:

    "Your bank doesn't want to have to offer you a competitive rate unless you force them to by doing a ton of extra work and by wasting someone else's time. If you follow their direction and ultimately reward them with your mortgage business, you are validating this approach, and I don't know about you, but as a loyal customer I would find it offensive".

    Once I say that and we get done talking about the Bank's terms and conditions, these clients rarely have any further contact with their bank rep.

    Banks who use this approach are effectively handing you their clients on a silver platter.
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  • Tony Romano 2015-05-05 9:45:11 AM
    This sounds interesting and fair as a concept, but is it enforceable? I'm not a broker so I'm just wondering.
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  • Craig Pritchard 2015-05-05 9:56:20 AM
    I would have to agree with David Larock, well said.
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