Rent Real EstateCanadian Financial Institutions Win Back Mortgage Market Share
Canadian mortgage brokers are seeing a drop in market share in the new mortgage market, after three years of steady growth, says a survey of new mortgage buyers. The survey also says that 84 per cent of those renewing their mortgages are staying with their current financial institutions.
The survey was released at a recent conference of the Canadian Institute of Mortgage Brokers and Lenders (CIMBL). It was sponsored and managed by Canada Mortgage and Housing Corp. (CMHC).
Market share for mortgage brokers dropped to 21 per cent in 2002, down from 25 per cent in 2001, the survey says. The mortgage brokers" share was also 21 per cent in 2000, but just 14 per cent in 1999, the first year the survey was conducted.
The survey found that 22 per cent of first-time buyers used a mortgage broker in 2002, down from 38 per cent in 2001 and 26 per cent in 2000.
Andy Charles, president of Home Loans Canada, a subsidiary of Canadian Imperial Bank of Commerce, said the drop in market share is happening partly because mortgage brokers are relying less on Realtors for mortgage leads.
"You need a balanced mix of referral sources, not just Realtors," Charles said during a panel discussion at the conference. He said one reason why consumers are using financial institutions for their mortgages is because they are looking for other financial products in addition to their mortgage. "Five years ago, consumers" expectation was just that they would get approved for a mortgage," he said. "Now they want to know what"s the best rate, and what other products they may be able to get with it."
The survey says that more than 75 per cent of mortgage consumers are familiar with the services offered by brokers, including that brokers shop for mortgages on behalf of consumers and can help consumers get a good mortgage rate. Most of Canada"s lenders pay a sales commission to mortgage brokers, with one exception ‗ Royal Bank of Canada, the largest bank in the country.
Scott Brown, vice-president of residential mortgages for Royal Bank, ruffled a few feathers at the conference when he suggested that mortgage brokers may have a tough time capturing more renewal business because they are charging lenders too much.
More home buyers are shopping around when looking for a mortgage -- 57 per cent, compared to 46 per cent one year ago. But many of those buyers are finding what they want with their existing financial institutions.
Some of the reluctance to deal with mortgage brokers may be because of the industry"s lack of standardized regulations. Quebec, Ontario, British Columbia and Alberta have licensing rules and mandatory educational courses, but the standards vary dramatically. In the rest of the country, there are no licensing requirements for mortgage brokers.
CIMBL has a new directional plan that will see standardized training for all members in the form of the Certified Mortgage Professional designation, which the association says will be introduced across Canada during the next 18 months.
"Seventy-five per cent of Canadian mortgage consumers indicated in our survey that they want to see mortgage professionals accredited and accountable to a central body," says Michael Beckette, 2002-03 president of the association. "CIMBL is committed to providing the public with that protection."
The survey also shows some consumer dissatisfaction with mortgage brokers. Consumers who dealt with mortgage brokers were asked if the brokers acted in a responsible manner. Fourteen per cent "strongly disagreed" that their brokers had acted responsibly, and only 30 per cent "strongly agreed" with the statement.
Panelists at the conference agreed that the national certification program, combined with better marketing of everything that mortgage brokers offer, will go a long way to winning back market share.
CIMBL has almost 4,000 members, representing those involved in mortgage origination, mortgage lending, mortgage insuring, mortgage servicing, and related support services to the industry. The CMHC/CIMBL study included 854 active mortgage consumers comprised of first-time buyers, repeat purchasers and those renewing a mortgage.