It’s an indication of just how committed RBC is to winning this year’s rate wars, with the mega bank taking on 1,000 new branch employees in the last 14 months – a large percentage of them mortgage specialists and five times as many new workers as it took on the previous year.
That strategy appears to have worked, with Canada’s largest bank recording an $11 billion gain in its residential mortgage portfolio over the 12 months ending July 31, according to its latest quarterly report. The performance helped cement its position as No. 1 among the “Big 6” in terms of mortgage market share.
The growth in its human resources, including mortgage specialists, also validates the concerns of mortgage brokers, fighting to retain their own market share against this year’s onslaught of bank competition and the increasing aggression of mobile specialists and branch sales people. The result has been their willingness to match and, in many cases, undercut even the broker channel’s lowest rates.
Many brokers have responded by buying down rate in order to retain business.
Canada’s only big bank to have never used the broker channel – and its specialists – may, in fact, be using the same strategy.
While employment rolls at the bank saw rapid expansion this year – RBC taking on 400 new workers in the third quarter, alone – the institution kept its “variable compensation” expenses, including bonuses and commissions, in line. That figure increased $55 million, compared to the year-ago period. Salary expenses grew by more than $70 million over the same period.
The ramp-up in its sales force may be over for the year, with the first tentative signs that the banks are starting to rein in on deep discounting, specifically on some of their ARMs.
Brokers, at least, hope that is the case.
“If the major banks are going to be reducing their discounts off of prime, it’s starting to make credit unions, mono-lines and other broker channel lenders – that generally haven’t followed suit – look really attractive to consumers,” said Darcy Doyle, a mortgage agent with The Mortgage Centre - Mortgage Evolution Yaletown. “And that allows brokers to be a lot more competitive today than they were yesterday. It seems that the rate wars are slowing and/or the banks have achieved their year-end targets.”
In the absence of a Central Bank move, RBC and BMO were the first to raise the floor on their variable rates last week, blaming higher borrowing costs for the decision to reduce their discounts on five-year variable closed mortgage by 20 basis points. Their move actually follows an earlier TD decision to effectively raise its own ARM rates.
But brokers charge that the branches are still prepared to go significantly lower than the bank’s advertised rate in order to keep clients from going over to the broker channel.