Online rate discounting the future?

Online rate discounting the future?

Online rate discounting the future? The future of the business is online and, according to one major broker, industry players who embrace that model will thrive in the coming years.

“People who are discounting right now and advertising and trying to move their business online right now are probably the future of the business,” Ron Butler of Butler Mortgage told “People who are delving deep into social media – they aren’t feeling the results today but they’ll start feeling the results more over the next two years.”

Millenials, who will account for a large proportion of the future home buying cohort, have grown up immersed in technology and social media, and they look online before making most major purchases, including mortgages. Which, according to Butler, will lead to an increase in the amount of discounted rates.

“The future generations are going to do research first,” Butler said. “So the more information about rates and products are online, the more likelihood they’re going to get a discounted rate.”

Currently, there are several brokers who have embraced the online model but they are still the minority. For now, at least. But what affect will that have on pricing?

“Future brokers can go 100 per cent social but the other reality is that … for the next generation of brokers the idea of doing a mortgage 115 basis points is going to cease to exist,” Butler said. “It’s going to be an exception; it’s going to be a rare mortgage that pays the full amount that is available.”

No stranger to discounting rates, Butler says that half of all his business comes from online leads, and the proportion of discounted deals across the industry is only set to increase.

“I would say in five years half of all mortgages will be discounted by mortgage brokers,” he said. “Half of all the mortgages written by the end of five years will not represent full commission.”

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  • Broker 2015-01-12 11:53:11 AM
    One article discusses how banks have taken back more market share in 2014. Banks do not discount, banks are destroyed by brokers when it comes to rates and yet they gained on us last year. Now this article discusses how you must discount rates/commissions in order be a player in this industry. Sell yourself short if you like but you don't have to in order to succeed.
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  • JSydneyH 2015-01-12 11:55:59 AM
    This sounds a lot like earlier claims about the impact social media would have on the real estate industry. While I won't dispute the fact social media has on the real estate industry and will have on the mortgage industry, my experience differs.

    When confronted with a never ending array of similarly priced products, the consumer DOESN'T make a choice because they have no confidence in their ability to distinguish one product from another. Limit the choices to a smaller number of selections and the choices become meaningful. This has happened with company sponsored investment options, packaged goods in stores, housing market, and now mortgages.

    The consumer will do their research online to find a good rate, but it will be a good mortgage advisor that recommends the 'best' mortgage for the consumer.

    I, for one, will continue to focus my energy on providing top quality advice - through social media - to my clients.
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  • momoney 2015-01-12 12:30:02 PM
    I don't think rate discounting is the way to go... Most people want a relationship with their, banker, broker, financial planner etc........ Most people went to their bank because Scotia calls up their clients like every two months.... How many brokers call their clients every two months? Hardly any, that is why approximately 2/3rds of their past business never will do business with them again..... Banks know this and that is why they call their customers... Want to beat the discount brokers and banks? Call your clients every two months and lock up their business.

    Mr Butler would agree on this point... He gets the rate discount shoppers and that I salute him for that. However you can wrap up your clients by going the extra mile, very few of them will leave you for the bank or for a discounter online.

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