Home shoppers seek out middlemen to deal with banks.
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and more Canadian homeowners are hiring brokers to negotiate their mortgages
rather than deal directly with banks, says a survey to be released today.
The study, conducted by Canada Mortgage and Housing Corp., shows 25% of consumers used a mortgage broker when purchasing a home, up from 14% two years ago. First-time home buyers were the most likely to call a broker -- 38%, up from 18%.
"The personal side of banking, in a lot of ways, has gone away," said Bob Ord, president and chief executive of Mortgage Intelligence Inc., the country's largest mortgage broker. "Most people deal with a Green Machine or an Interac machine. You don't deal with people anymore [at a bank]."
Mortgage brokers, like insurance brokers, shop around on behalf of consumers for the best rates from banks, trust companies and other mortgage lenders, from whom they receive commissions.
Their growing popularity means mortgage brokers are adding employees even as the major banks cut staff. Mr. Ord says his company expects to have about 500 agents by next year, up from 360 today. "The growth in this industry is exponential," he said.
One reason for the rise in brokers is discounting, the practice of granting mortgages that are well below the posted rate, said Ronald Swift, senior vice-president at MCAP Mortgage Corp., a Toronto-based mortgage lender. "Some consumers are not as comfortable around the negotiation prices, so they can hire a broker to do it," he said.
Rick Lunny, senior vice-president of real-estate secured lending for TD Canada Trust, said his bank doesn't worry about the increasing clout of mortgage brokers, saying the trend to using them does not affect the profitability of mortgage loans for the banks.
"We'll deal with customers in the manner they choose," said Mr. Lunny. "If it wasn't economic for us [to grant mortgages through brokers], we wouldn't support it."
Royal Bank of Canada is the only major domestic bank that won't deal with independent mortgage brokers.
Michael Ellenzweig, executive director of the Canadian Institute of Mortgage Brokers and Lenders, (CIMBL) predicted that mortgage brokers will arrange 50% of residential mortgages in Canada by 2005. That would put it closer to the U.S., where470% of mortgages go through intermediaries, he said.
To get to that level, the industry will have to do more to market itself. The study showed a substantial minority of homeowners don't even know such a service exists, and many others don't understand how it works.
Less than two-thirds -- 63% -- of those surveyed knew what a mortgage broker is. Almost half of respondents said, incorrectly, that they charge fees directly to consumers for their services.
While brokers enjoy good success with first-time home-buyers, they have barely cracked the lucrative refinancing market. Only 9% of those renewing their mortgages hired a broker to look for the best deal. Ninety percent simply renewed with their current lender, usually accepting its first offer.
"That next opportunity is that $400-billion [renewal] market," said Mr. Ord. "That will fuel the growth up past 50%."
CHMC and the CIMBL paid for the survey of 850 consumers with mortgages. The results are considered accurate within 3.4 percentage points, 19 times out of 20.
ddecloet@nationalpost.com