The battle for renewals is a fight that brokers are gonna lose, says a leading mortgage broker.
“We are up against six of the richest companies in Canada, individual Davids pitted against six Goliaths,” says Ron Butler
, president of Butler Mortgage, saying brokers need to realize that the cards are all stacked in the banks’ favour.
“It is their money, their contract and their decision to approach the client six months before renewal,” Butler told MortgageBrokerNews.ca. “Sometimes we as brokers just have to suck it up and realize that this is a free enterprise system, and that this is the way it should be – to the advantage of the client.”
The push from the major lenders is being felt through the brokering channel, as CAAMP
’s 2012 fall survey numbers suggest. A total of 47 per cent of people who took out a new mortgage last year used a broker, but those numbers plummeted to 27 per cent upon renewal, as banks used their advantage to approach clients early with offers of low, discounted rates to renew.
“The banks are very aggressive these days,” said Jim Furlong, marketing manager and administrator with The Price Team. “They are actively seeking out new clients.”
The aggressive campaigns by the banks to win new clients appears to be working when you look at survey numbers, but as CAAMP’s CEO Jim Murphy points out, many people are agreeing to early renewal offers proffered at “best rates.”
“Most of those people should be shopping around,” said Murphy.
According to Derek Rowley of Real Mortgage Associates, banks have become so aggressive on renewals that they are welcoming with open arms clients who had been initially rejected.
“Banks are extremely aggressive now,” he said. “People that were declined through a broker are now being wooed for renewals.”
In fact, as it is his duty as a broker to recommend the best deal for his client, he has told some to go ahead with a renewal offered by the bank.
“When the client approaches me, and they tell me that they received their renewal notice from the bank, I tell them to go ahead and take it,” said Rowley. “I know that there is no way I could qualify that client with another lender with their bad credit rating.”
It is a battle that seemingly is pitched in the bank’s favour.
“It is always unlikely we can hold a rate as long as the bank can, and right now the big banks are inclined to match all of our rates,” says Butler. “It is a decidedly difficult situation, but this is a free enterprise system.”