Broker: Never, ever buy down rate

Broker: Never, ever buy down rate

Broker: Never, ever buy down rate

He’s increasingly an anomaly, but a veteran broker who has never bought down rate is admonishing the growing number of mortgage professionals now relying on that retention strategy, suggesting it only delays the inevitable.

“If you’re a single, independent mortgage broker trying to buy down rate in order to keep a client from going over to a bank offering a better rate, you are competing with the bank, and you are not going to win that competition,” Ad Lakhanpal, with Mortgage Alliance in Oakville, Ont., told “I’ve had agents agree to do it, and then they’ve gone back to the lender to get a new commitment letter to present to the client. But the process doesn’t end there: the client then goes back to the bank again, and they better that new rate. So they’ve still lost the client. I’ve never bought down rate and I never advise it.”

Fewer and fewer brokers and agents across Canada are prepared to say the same, as competition with the bank heats up and originations slow down. Some mortgage professionals are, in fact, suggesting as many as 80 per cent to 90 per cent of brokers are now prepared to sacrifice a portion of their commission in order to shave even five basis points off of a client’s interest rate.

Once dismissed as a last-ditch effort to retain customers, a growing number of brokerages are using it as a first line of defence as they ramp up online lead generation efforts, dangling rock-bottom rates on the Web to attract shoppers.

“At the end of the day, I found that I got the lead if my rate on that product was the lowest on the (referral site) that day,” Paul Poirier, a top-20 broker with Dominion Lending Centres based in Toronto, told “People online are looking at rate, first and foremost. They’re not like referrals from clients. Here the rate has to be the lowest or very near the lowest to get the lead.”

He’s one of several broker using online referral agents – sites like and – to buy down their rates, a compromise balanced by higher volume numbers and the benefit of winning another referral source. Other brokers are increasingly turning to no-frills lenders like Lendwise, taking 50 basis points on a deal in order to access even lower rates.

Lakhanpal isn’t convinced giving up commission works in either the long or short-term, pointing to the threat of client flight once they have broker-arranged commitment letters in hand.

Rather than buying down rate, he told, brokers should concentrate on referral business, more interested in the value brokers bring to the table beyond rate. He has one other key bit of advice: “When a client comes to me, I always ask them if they’ve been to the bank yet. If they say ‘No,’ I send them there first.”