Buck up, brokers. By one industry veteran’s calculations, the channel has actually gained – not lost – key market share in the difficult years following the subprime collapse.
“We’ve all seen and heard a lot of handwringing and lamenting about the loss of broker market share,” David Larock, president of TMG
The Mortgage Group Integrated Mortgage Planners in Toronto, told MortgageBrokerNews.ca
. “But is that the case? By my calculations, if the subprime market was six to seven per cent of the overall mortgage market before the credit crunch in 2007 – almost all of that broker market share – then we should have lost a corresponding amount of our market since that time. That just hasn’t happened, which means we have largely replaced the lost subprime portion of our business with new prime business, even in the face of increased competition from the major banks.”
The analysis flies in the face of growing concern about the future of the industry and a new report from CAAMP
suggesting market share for mortgage professionals has actually slipped since 2010.
Larock is painting a very different picture, contrasting CAAMP’s most recent survey results with those from 2007, just prior to the global credit crunch and the decimation of Canada’s subprime market.
In 2007’s poll, CAAMP found 25 per cent of new mortgages that year were obtained through a broker, just two percentage points lower than the 27 per cent who did so in the 12 months ending this April.
The earlier 2007 figure is particularly interesting, said Larock, in that it provides a snapshot of the market just before the collapse of subprime lending – a segment of the market once dominated by brokers, and largely ignored by the big banks.
Ostensibly, broker market share fell by as much as seven per cent in the weeks following the meltdown. But fast forward to 2011, and the broker channel now controls 27 per cent of the new mortgage market. It suggests brokers have been able to grow prime-market originations to “more than compensate for that loss of subprime mortgages,” said Larock, who worked in the alternative lending sphere for more than a decade. “Far from losing ground, we’ve recovered more market share than we’ve lost.”
His calculations are meant to answer critics – in and outside the industry – who charge the broker channel has increasingly failed to fend off competition from the Big Five, as they enlarge their collective sales force and expand marketing campaigns and mortgage products to grow portfolios.
“Of course if you carpet bomb the market with sales people you would expect the banks to increase their market share,” Larock told MortgageBrokerNews.ca. “But some critics have created the perception that because of that we, as brokers, represent a weakening segment of the market and are using a flawed model. The numbers just don’t support that.”