While Big Banks Hold onto Mortgage Share, Who do Brokers Prefer Working With?
According to recent CAAMP reports, though 55 per cent of mortgage shoppers will start with mortgage brokers, only 27 per cent will also close with them. The majority of Canadians will still stick with their major banking institution instead of utilizing an online broker, in contrast to buyers in our neighbour south, and even to the U.K. where online mortgage shopping has picked up by 33 per cent over the last year (Greenlight).
Up from the quarter previous, Canadian big banks took a 56.5 per cent chunk of mortgage broker volume last quarter (Davis+Henderson). As per market share, the top mortgage lenders in Canada currently look like this:
Recently, Manitoba suffered the most severe flooding the region has experienced in nearly 14 years. As a result, more mortgage lenders are now being strict about location specifications in their applications, Canadian Mortgage Broker News reports.
Now, more lenders are pointing to the “safe” location information related to certain areas, such as those in flood zones, to avoid increased damage claims from potentially affected areas.
“In our application notes, we’re putting in that the property hasn’t been affected by the flooding, or isn’t in a flood zone,” Brad Poole, a principal broker at a major lender, told the news source.
For many potential first-time homebuyers, beginning a home search can seem daunting. However, Regina Leader Post contributor Barbara Hitchens says those people may want to fill out a Canadian mortgage application for a preapproval before they start attending open houses.
A free preapproval, Hitchens says, will allow buyers to see how their credit reports would affect any potential home loans, and give them a set price range they should stay within when looking at homes.
Taking that step, she adds, will prevent buyers from finding the “perfect home” and then finding out that they can’t actually afford the payments needed to buy it. It can also help buyers show sellers and real estate agents that they are serious about the process and are a legitimate buyer.
Experts tell CTV that because they are new to the process, some first-time homebuyers can make mistakes in getting their home loan that come back to haunt them later on.
Lenders told the source that sometimes, buyers “fall in love” with a home and then overspend on it or don’t take normal precautions, such as getting a home inspection. Economists also said buyers should be careful to take a close look at their finances, even after completing a mortgage application and getting preapproved for a certain amount.
“Look at what your paycheque is net … and see what is left at the end of the month,” Ms. Kiskuna, a regional sales manager at Royal Bank of Canada, told the source. “The last thing you want to do is hang yourself out to dry with [mortgage] payments that are simply too high to carry.”
Fixed Mortgage Rates Up
Attributed to a rise in bond yields, big Canadian banks TD Canada Trust and RBC have decided to increase mortgage rates on their five-year fixed rate mortgages by as much as 25 basis points, or one quarter of a per cent.
The decision is marked by higher bond yields, meaning it is more expensive for banks to borrow in the bond market, a cost that is offset by raising mortgage rates available to consumers.
Fliogix Expert is the software platform the majority of mortgage brokers in Canada use to send their applications to lenders in Canada for processing. In the last three months, more than 14,000 different mortgage brokers and 77 lenders used Filogix Expert to submit their mortgage applications in Canada.
Though Filogix Expert dominates the mortgage application platform industry, there are two competitors at this company’s heal: MorWeb and Axcess Canada. It is difficult for smaller companies to break into the platform technology industry. Amassing a wider margin of market share among Canadian mortgage brokers involves convincing both lenders and mortgage brokers that their platform is worth the training time, the implementing efforts and the introduction to clientele. Breaking into the mortgage application platform industry involves a large amount of financial and technological resources.
A growing number of Canadians are negotiating lower than advertised rates, according to a survey conducted last month by CAAMP and Maritz. While advertised rates have averaged 5.65 per cent over the past year, Canadians who have opted for a five year, fixed-rate mortgage within that timeframe have managed to secure an average rate of 4.23 per cent, saving 1.42 per cent in interest payments over their term.
Imagine a mortgage calculator so comprehensive that the least expensive route to home ownership becomes tangible before a commitment is made; a mortgage calculator that can calculate beyond down payment, monthly payments, rates and amortization length.
Thanks to the Canadian Mortgage Calculator created by Jon Wittwer, this ability has become accessible to all prospective Canadian homebuyers with an Internet connection and Excel. Wittwer’s mortgage calculators actually take into consideration potential tax deductions mortgage interest can generate, and the lump sum payments you might make along the way.
Despite all-time interest rate lows, the Canadian mortgage market has started to see a cooling; especially for big banks and in major cities Toronto and Vancouver.
And what, you may ask, is TD’s strategy to stay afloat in a competitive mortgage market which has seen the Canadian home buyer’s business increasingly shifted towards mortgage brokers? As of October 18, 2010, all mortgages issued by TD Bank will be collateral mortgages.
When big lenders, banks, insurance companies, and other financial institutions say the wells are dry for commercial lending, another group of financiers offer a spring. Private commercial lenders, particularly in the US commercial mortgage market in Ontario, are increasingly becoming the go-to for hard-to-fund commercial projects.
Alternative, or non-traditional, commercial financing can mean funds loaned by wealthy individuals, investor capital pools, limited partners, mortgage investment corporations (MICs) or even hedge funds. Private lenders tend to charge higher interest rates than conventional commercial lenders, sometimes upwards of prime plus eight per cent, and fees of one to five per cent of the total loan value, but they also tend to take on projects that conventional lenders will not.