National Bank’s shelving of broker-mediated selling offers a glimpse into the future

by Ephraim Vecina07 Dec 2016
National Bank’s abrupt dissolution of its broker division is but a portent of what the mortgage brokerage sector can expect in the next few years, according to an industry veteran.
Effective this month, National Bank will be utilizing a third-party model in providing its branded mortgages, specifically through the mortgage process outsourcing firm Paradigm Quest. The closure of the Bank’s broker-mediated distribution has left Scotiabank and TD as the last of the Big 6 to sell mortgages through brokers.
In a recent contribution for The Globe and Mail, founder and intelliMortgage planner Robert McLister stated that the Bank’s move offers a look at how the industry would conduct its business in as little as half a decade from now.
“Most homeowners will start their rate shopping online. Why? Because it’s fast and convenient. Mortgage websites that appear highest on Google will get the most traffic and set consumers’ rate expectations,” McLister predicted.
“All lenders, not just online lenders, will have to pay attention to what’s happening online. That will ratchet up rate competition to yet another level.”
Brokers will still have a place in this landscape, however, as they will prove instrumental to those who prefer alternative lending avenues.
“The best deals often come from big bank challengers. Brokers will always be invaluable for consumers who don’t want to compare rates themselves, or who can’t get approved by a bank. With all the recent government rules, some lenders now have eight different rates for a 5-year fixed mortgage,” McLister wrote.
“Experienced brokers will continue helping folks sort out which of those rates translates to the lowest cost of borrowing, given the ever-growing array of penalties and rate restrictions.”
And all the time, banks will remain in the broker channel (albeit indirectly) to stay profitable.
“The National Bank news reflects a mortgage market that’s evolving faster than at any time in its history. The good news is that e-mortgages will force more competitive rates. The trade-off is, you’ll increasingly need to do your own mortgage research, or pay a premium for independent ‘full service’ mortgage advice.”



  • by 12/7/2016 9:57:32 PM

    CIBC (Firstline), BMO, HSBC, ING and National Bank have exited the origination channel for mortgages sourced from mortgage brokers. Canada's largest FI, RBC was never there...Scotia and TD are the last chartered banks in this space but rumour has it that one of these banks is considering a similar decision to pull out.
    Enter the new Federal mortgage rules which will impact the ability of monoline lenders to securitize their portfolios, thus limiting their future ability to compete with the banks on rate...While rate is not the only reason why a consumer would use the services of a mortgage broker, if we are all being honest with ourselves, it is likely the strongest value proposition for this channel.
    The banks have agreed to shoulder some of future default risk so not to cripple CMHC and the private insurers... when rates increase and presumably when defaults increase resulting from overextended borrowers not being able to carry higher payments. One has to wonder if the banks had a few conditions for the Feds before agreeing to spread the risk?
    It appears that dark clouds are on the horizon for mortgage brokers...

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