Are Mortgage Lenders Partners or Competitors?
The Canadian mortgage business is still dominated by the major Canadian Banks and Credit Unions. While most of these mortgage lenders have a Mortgage Broker Division to handle the origination of mortgage loans from mortgage brokers, they also have retail banking that service and compete for business with the mortgage brokers.
The market share for mortgage origination through the mortgage broker channel in Canada has been staying around the 25% level for the past few years. The biggest competitors faced by mortgage brokers in Canada are Canadian Bank’s retail branches. The everyday banking convenience and complimentary banking services by a home owner’s bank first-contact in capturing the mortgage business, in spite of better rates or personal services offered by mortgage brokers.
Who Owns The Clients?
Once a mortgage loan is completed and a client become a customer of a mortgage bank, the mortgage broker is put in a disadvantage position to continue keeping the client for future mortgage business. Although the mortgage broker may have maintained close contact with his client, the odds are against the broker doing the mortgage renewal business when the term is due.
The mortgage lender is treating the client as the bank’s customer. The broker will not be paid when the client renew or refinance his mortgage with the mortgage lender.
Low Renewal & Loss of Business Income
Another hurdle faced by mortgage brokers is the renewal business that brokers able to get on renewal is less than 20%. majority of the borrowers will renew their mortgages with the banks that the brokers placed the business with. A mortgage broker will have to constantly look for new business and clients who are in need of help with their mortgage applications.
Mortgage Bankers like MCAP and FirstNational Financial are working diligently to build their mortgage broker origination business, and work with the mortgage brokers to build their book of business by helping the brokers with clients’ mortgage renewal business.
The Mortgage Group, a Canadian mortgage company with operations in most of Canadian Provinces is the first mortgage brokerage company that will embark on providing their own branded mortgages to Canadian borrowers. Over time this can effectively enhance the role of mortgage brokers in the company to play a more significant role as a mortgage and financial advisors for the betterment of Canadian home owners.
The rational for the move is aimed at keeping mortgage advisors building their book of business. Elsewhere in Australia, the problem of mortgage lenders protecting their market share and profitability was high-lighted in a recent blog posting here.