|
Home shoppers seek out middlemen to deal
with banks.
 More
and more Canadian homeowners are hiring brokers to negotiate their
mortgages rather than deal directly with banks, says a survey to
be released today.
The study, conducted by Canada Mortgage and Housing Corp.,
shows 25% of consumers used a mortgage broker when purchasing a
home, up from 14% two years ago. First-time home buyers were the
most likely to call a broker -- 38%, up from 18%.
"The personal side of banking, in a lot of ways, has gone
away," said Bob Ord, president and chief executive of
Mortgage Intelligence Inc., the country's largest mortgage broker.
"Most people deal with a Green Machine or an Interac machine.
You don't deal with people anymore [at a bank]."
Mortgage brokers, like insurance brokers, shop around on behalf
of consumers for the best rates from banks, trust companies and
other mortgage lenders, from whom they receive commissions.
Their growing popularity means mortgage brokers are adding
employees even as the major banks cut staff. Mr. Ord says his
company expects to have about 500 agents by next year, up from 360
today. "The growth in this industry is exponential," he
said.
One reason for the rise in brokers is discounting, the practice
of granting mortgages that are well below the posted rate, said
Ronald Swift, senior vice-president at MCAP Mortgage Corp., a
Toronto-based mortgage lender. "Some consumers are not as
comfortable around the negotiation prices, so they can hire a
broker to do it," he said.
Rick Lunny, senior vice-president of real-estate secured
lending for TD Canada Trust, said his bank doesn't worry about the
increasing clout of mortgage brokers, saying the trend to using
them does not affect the profitability of mortgage loans for the
banks.
|
"We'll deal with customers in the manner they
choose," said Mr. Lunny. "If it wasn't economic for us
[to grant mortgages through brokers], we wouldn't support
it."
Royal Bank of Canada is the only major domestic bank that won't
deal with independent mortgage brokers.
Michael Ellenzweig, executive director of the Canadian
Institute of Mortgage Brokers and Lenders, (CIMBL) predicted that
mortgage brokers will arrange 50% of residential mortgages in
Canada by 2005. That would put it closer to the U.S., where 47% of
mortgages go through intermediaries, he said.
To get to that level, the industry will have to do more to
market itself. The study showed a substantial minority of
homeowners don't even know such a service exists, and many others
don't understand how it works.
Less than two-thirds -- 63% -- of those surveyed knew what a
mortgage broker is. Almost half of respondents said, incorrectly,
that they charge fees directly to consumers for their services.
While brokers enjoy good success with first-time home-buyers,
they have barely cracked the lucrative refinancing market. Only 9%
of those renewing their mortgages hired a broker to look for the
best deal. Ninety percent simply renewed with their current
lender, usually accepting its first offer.
"That next opportunity is that $400-billion [renewal]
market," said Mr. Ord. "That will fuel the growth up
past 50%."
CHMC and the CIMBL paid for the survey of 850 consumers with
mortgages. The results are considered accurate within 3.4
percentage points, 19 times out of 20.
|
