Lots of info in this one. First off, I recently attended the CMHC 2009 Broker Survey meeting in Halifax and got some great information to share (some of it about rates is very surprising). And to back it up, I got an article from Canadian Mortgage Trends website that talks to the point of Best Deal over Best Rate. Enjoy.
CMHC 2009 Customer Survey
· Brokers market share
o 44% of first time buyers
o 38% of all purchasers (nationally and in Atlantic Canada)
· 24% of all mortgage transactions are done by brokers
o 16% are done by personal bankers
o 13% are done by general loans officers
o Another 7% done by bank managers/senior staff
o That’s 36% being done in the bank and another 33% done by bank’s “sales force” staff
· 90% of all renewers stay with their original lender (this speaks volumes about trailer fees offered by Merix – why swim against the current?)
o 66% of all first time home buyers stay with their original lender
· What is the customer’s main reason for remaining with their original lender?
Reason Renewers Refinancers 1st time buyers Repeat buyers
Rate 45% 40% 52% 50%
Service related 33% 32% 26% 26%
Convenience 20% 17% 16% 13%
· This shows that if the client is staying with their original lender, it is usually rate/deal related, so trying to move a client for a better rate doesn’t seem to work
· And if they are switching lenders due to rate, how much of a difference does it take for them to move. You might be surprised by this:
Main Reason Renewers Refinancers 1st time buyers Repeat buyers
25 bps or less 7% 3% 5% 8%
25 to 50 bps 17% 10% 23% 21%
50 to 75 bps 8% 18% 22% 15%
75 to 100 bps 16% 13% 8% 8%
100 to 200 bps 23% 22% 21% 29%
200+ bps 24% 31% 13% 14%
· This shows that a rate difference below 25 BPS is really not that important to the clients.
· Then what drives a client’s satisfaction, if it is not just rate? Of all segments surveyed, 32% said “Best Deal” was the key driver of satisfaction. 25% said “Rate”, 20% said “Good Relationship” and 13% said “Good Service”.
These are great points to guide you as to where to focus in your business. Get the client the “Best Deal”, not just the best rate, but keep the rate in the ballpark (within 25 BPS of the others). And use a lender who will pay you after renewal (now who does that, oh yeah – MERIX), as 90% of your customers are staying with their original lender!
July 22, 2009
The Best Mortgage Rate for You
The Mortgage Centre’s rate page has a very sage title:
“Is it the best rate, or the best rate for you?”
Its point being: A lot of websites claim to have the best rates, but there’s always more to the story.
For one thing, probably 95% of “best rate” claims are false. More importantly, as the Mortgage Centre rightly suggests, the lowest rate is not necessarily the best rate for you.
Unless you know who the quoted lender is, and know that lender’s criteria for credit score, debt ratio, property type, loan-to-value, income, etc., there’s no way to tell on your own if you meet their standards. (Albeit, someone proving $100,000 income the past few years, putting down 20% on a marketable home, with a 35% TDS, and an 720 beacon score, can feel confident about qualifying at most lenders [just as an example]).
Back to the point, there are lots of qualification hoops to jump through with some lenders—especially the lowest cost lenders.
Moreover, there are various economic dangers strewn about the fine print of many mortgages. Examples include:
Zero prepayment privileges
12-month interest penalties
IRD penalties based on bond yields
Fully closed terms (no way out until maturity)
Ultra-short rate-hold periods
No pre-approvals
No portability
Other annoyances:
Horrible post-closing service
Slow approval times
No online access
Unexpected fees
It is the job of mortgage planners to filter the plethora of mortgages and present the best overall value to you. When determining overall value, rate is the #1 criteria, but only after a mortgage is determined to be suitable.
There’s no downside to good advice, so get as much of it as you can. As Canadian Mortgage Professional very wisely wrote: “Homebuyers who ask mortgage professionals 'what is your best rate?' are not going to be well served by a mortgage professional that simply responds with a number.”
Posted at 12:49 AM (www.canadianmortgagetrends.com)
