Old Strategy Sees New Resurgence
A tactic common during the ‘80s and ‘90s is seeing current flare-up as the Big Five Canadian banks compete with independent brokers to retain their mortgage clientele, says a recent post on Mortgage Broker News.ca. Canadian brokers told the agency of banks and even credit unions that are willing to cover penalty fees to keep clients wishing to refinance or close their terms early.
The strategy comes as a retaliation to brokers who are able to offer better mortgage rates than the bank-posted rates.
“Thankfully, we’re seeing it used in a limited number of cases and it represents an unsustainable strategy for the banks,” Jessi Johnson, president of the Verico Jessi Johnson Mortgage Team, told Mortgage Broker News.
“Usually, in our experience, the banks make it up on the back-end, with a slightly higher rate,”
Todd Fralic, a partner at Quantus Mortgage Solutions in Calgary, said. “Nothing surprises me with the banks offering deals that don’t seem to be good business.”
Even some brokers suggested that eating a penalty or buying down a rate is worth it to keep the deal, while others stated they preferred the approach of actively maintaining a positive relationship with the client for future dealings, even if it means losing out at the onset.
“We constantly battle the banks on retention,” an Ontario broker commented. “Some of the lenders won’t release the discharge statement without speaking directly to the client giving them one last opportunity to steal the deal days before closing.”