Broker not intimidated by rate sites, buydowns

Broker not intimidated by rate sites, buydowns

Broker not intimidated by rate sites, buydowns Despite increasing competition from rate sites and competitors buying down rate, one leading broker sees the changing industry landscape as an opportunity to refocus his business.

“People should stop complaining about (rate buydowns) and start doing something about it – like change the way they do business. If they’re trying to do business today (the same way) they did ten years ago they’re going to fail miserably,” Paul Mangion of the Mortgage Centre M.O.S. MortgageOne told “Pick different niches of the market, pick the sub-prime; if you deal with upper clients, educated clients most of them don’t care if it’s 10 bps lower or five bps lower.”

Mangion sees similarities between the current mortgage industry and the evolution of the trucking industry; one he was forced out of when profits shrunk. He isn't as pessimistic about his current vocation, though.
“I was in the trucking industry and I saw ten years later we’re still charging the same rates only gas isn’t 60 cents a litre it’s $1.20; it was a race to the bottom (and) I saw the writing on the wall (that) only the big guys (were) going to succeed,” Mangion said. “Here’s the beauty of our industry: We’re service oriented so we can control our costs (while) the trucking industry is very labour-intensive plus you’ve got to pay for the capital equipment, insurance.

“In this industry what do we pay for? An office and the internet.”

His comments follow news that yet another lender is offering a sub-three per cent five-year fixed rate, which will certainly force a number of brokers to buy down rates to compete. Much ado has been made about the prevalence of rate buydowns and the long-term effect the trend will have on the industry. And while Mangion isn’t a fan of the model, he realizes there is still a market for his own business style.

“I don’t do any advertising anymore … because it’s a waste of money,” he said. “You pay the greatest amount of money for the worst type of client; the best type of clients are referred clients.

"Pick and choose the clients you want to deal with. There are hundreds of thousands out there; you don’t have to deal with everyone of them."

  • Rae Steil 2014-02-25 12:25:46 PM
    I had a client (referred by a past client) recently ask me why he should deal with me as opposed to another broker or bank. He didn't care about the rate. We should all be able to answer this question. Rate won't be an issue if you know how to answer this.
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  • James Shinners 2014-02-25 12:44:36 PM
    Are all the banks on these rate sites? No. Do banks alwyas offer the lowest rate? No. Are the banks worried about going out of business due to rate sites? No. If some brokers want to give up a chunk of thier commission, who cares? At the end of the day you really don't have to be cheapest place to get a mortgage to be a great mortgage broker. I think clients understand that they get what they pay for. Marginally higher rates usually means better service.
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  • Jeremy Nagel 2014-02-25 2:10:25 PM
    I agree with Paul and the others posting comments here. However, I would like to ask, what is 'great service'? The term 'great service' is subjective and over used, in my opinion.

    if it's true that 20% do 80% of the business, then what is it that the 20% are doing? The 20% realize they have to decide on who they are. See, in my opinion, they have chosen to either cut commission and offer cheaper rates or work for full commission and provide value beyond rate. While the other 80%...they haven't yet decide who they are. They are busy trying to be all things to all people. Pick your model.

    Commission cutting is a race to the bottom, period. And for some it's an easier conversation to have with their customer, path of least resistance. I'm okay going head to head with Ron or Dan or any other commission cutter. At the end of the day I'm looking for loyalty/relationship and you don't attract loyalty based on price. I have accepted the reality that there will always be someone willing to undercut, and if the banks saw value in the model, they would put all the commission cutters out of business. It's such a small segment that it's not going to happen.

    Have a great week everyone!

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