This past weekend I was often asked, “Why do people use mortgage brokers to obtain their mortgage, when they can simply go to their own bank?” The answer is, “Do you still go to the bakery for your bread or go where there are more options, such as the grocery store?”
Well the bank does have options, but they only have their own products to offer so they are limited as to what they can offer, whereas mortgage professionals have almost all of the banks at their disposal plus alternatives that the banks can’t even dream of.
Mortgage brokers evolved in the late 1970s and early 1980s as a way for those with credit issues to find alternative means to either buy homes or keep the one that they had. So there is a generation out there that still thinks that going to a mortgage broker is going to cost them more.
But like any evolving industry, change is inevitable and some new lenders came on board and began offering better than bank rates for those clients with great credit. And the snowball effect started, whereas almost every bank in Canada has a broker channel that supplies them mortgage business.
Currently a mortgage broker has over 50 lenders at their disposal, with many different programs and rates. And the best part is the mortgage brokers have gotten all the lenders to compete with each other to obtain the consumers’ business.
To start off, all the lenders provide us with their best wholesale rates, yes I said wholesale rate. Whereas if you had gone to your banks branch, they’ll usually provide you with their retail rate, then you’d have to do your homework to see what other rates are out there and haggle with them over it.
Yes, still these days, the bank wants to negotiate over rate, because time as shown them that they’ll make more money that way as opposed to providing the best rate upfront.
During the past decade, mortgage broker volumes skyrocketed as we took more and more market share from the bank branches, and over the past five years we’ve been hovering around the 40% level of mortgage volume for the entire country.
Lately though, the banks have been getting more aggressive which is fine, but competition should be based on what you are providing and not on false remarks made by a few. Competition keeps everyone on their toes, but I’ve been hearing some disturbing comments about what some people from the banks are saying about mortgage brokers to their clients. Comments such as they don’t know what they are doing, they are unprofessional, they are fraudulent and their rates aren’t what they used to be.
For sure there may be some unprofessionalism from those that treat this career as a hobby and not as a profession, and it’s true that a few bad apples can spoil a barrel, but I find it interesting that lenders are so concerned about broker fraud especially when the largest fraud in Canadian history was perpetrated by BMO and RBC-two banks who don’t even accept business from mortgage brokers.
As far as rates are concerned, a mortgage isn’t all about interest rates, as there’s more to a mortgage than just rate, there may be less flexibility with the lowest rate out there, so it’s best to look at all of your options.
When it comes to searching for your mortgage professional, consider this; What educational tools are available from them? Do they have personal client testimonials? How long have they been in the business? Will that same person that you established a relationship with originally be there to help you next time?
Reality is competition is healthy for everyone, especially the consumer. And if we don’t treat the consumer with integral fairness, professionalism and provide the tools they are looking for, then none of us would be doing business for a long period of time.
Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group and can be contacted for appointments at 403-343-1125 or emailed to firstname.lastname@example.org.