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.”

  • Jim from Durham Region- Broker 2011-08-26 1:20:52 AM
    I agree that there is a lot of agents out there cutting and cutting till they win the client but are not properly compensated for their hard work. The issue here is that there is a surge of mortgage agents out there doing just that. They are thinking to get the business they must cut rate and it is even not against the retail bank's but fellow mortgage agents or brokers. They are not that well educated by their mortgage broker of record or firm they are working for. This is hurting a lot of long time mortgage brokers and agents. A thought here is that instead of cutting mortgage rates why not offer other services in conjunction that they should be doing with possibly other home related services that they should be doing to make the client want to close the deal with you. Just a thought as I truly offer complimentary services besides rate cutting and it has done nothing but add to my firms volume.
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  • James Shinners 2011-08-26 1:23:29 AM
    Brokers who focus on rate and buy down rates, and often reduced commissions, will likely soon be out of business. While we're in business to offer the client great service and mortgage options/advice, we also have to make enough money to stay in business to be able to continue offering that great service.
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  • John 2011-08-26 1:40:14 AM
    25 plus years and have never felt the need to buy down the rate. Just those who will be here a couple years will have that need. If they had more customers, they could afford to lose more customers....
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