As the big banks increase their fixed rates, monolines like MCAP and First National are following suit – eliminating any breathing room for brokers already trimming commissions to accommodate clients.
“The first question out of their mouth is always ‘What is your best rate?’” says Shawn Mooney, a broker with Verico Bayfield Mortgage Professionals in Airdrie, Alberta. “It was tough to convince them (clients) that there is more about mortgages than just the rate.”
RBC, TD and BMO all raised their fixed rates in response to bond prices falling in value last month. Most banks moved from 2.99 to 3.09 per cent on a five-year fixed mortgage – with RBC applying the biggest increase to their five-year closed mortgage, moving it from 3.09 to 3.29.
First National raised their 5-year-fixed rate to 3.09 on Friday, after MCAP increased their rate to 3.09 on the same product (but still offering 2.94 on a quick close mortgage).
Still, brokers are hoping other monolines will hold fire, winning them a competitive edge without relying on buydowns.
“I do feel that the move by the banks to increase their rates will ultimately help brokers,” Mooney told MortgageBrokerNews.ca. “When the banks rates are similar to ours it is tough sometimes to grab a customer who is loyal to the bank and convince them to use one of our lenders they are unfamiliar with. It will at least grab their attention and give us a better fighting chance of winning those customers from the bank.”
Some of the non-bank lenders are expected to cash in, but the real winners will be clients, says Mooney, who will benefit from the expertise of mortgage brokers.
“Bankers don’t really know mortgages,” he says. “Sure, they know a lot about banking, but not as much as a broker does. Their lack of expertise in dealing with mortgages is what’s been driving clients our way for the last few years.”
Lawrence Kobescak, a broker with OntarioMortgageSuperstore.com, agrees. At the same time, he comments suggest monolines may need to continue pricing their wares lower than the banks despite the vagaries of the bond markets.
“These smaller lenders have no choice but to be aggressive on rate to begin to even attract potential customers,” says Kobescak. “This competition between the monolines needs to attract customers and the banks willingness to match their rates will continue to ensure that Canadians are truly offered a competitive rate from both the monolines and the banks.” ---Donald Horne, Mortgage Broker News