Residential Lending Solutions
ANNUAL
BROKER
REPORT
COMPASSpoint
The annual FCT EXPERT/ease mortgage market review
...The entrepreneur’s business is their artwork. The creation of
business is as creative as any creation in art. In fact, building a business
may be the most creative human activity of all.
~ C.K. Prahalad (1941-2010)| distinguished professor of business, University of Michigan |
best-selling Harvard Business Review author
Overview
Since the 2012 legislative changes, the ‘state of the union’
for Canadian mortgage brokers has been remarkably
consistent: how do we as a profession grow our business,
our reputation, our networks and do so profitably.
2015 isn’t just an entry on a calendar—it’s a call to action. In
our inaugural COMPASSpoint, we’ll take stock, explore the
implications of the retrospective data from 2014, and identify
strategies grounded in both market and competitive analysis.
The complexities of life as a mortgage broker don’t reduce to
simple data-points–here at COMPASSpoint. Our objective is to
start a conversation about sharing best practices and business
intelligence in the mortgage brokerage business.
The growing professionalism of mortgage brokers—the
deepening curriculum and personal development resources
available is proof positive there’s an appetite to grow that
professionalism—can’t happen at a better time. As the 2014
CAAMP data shows, 1. (http://caamp.org/meloncms/media/
Annual%20State%20Report%20Fall%202014.pdf) the
Canadian mortgage market is, as ever, in flux:
u
changing homebuyer demographics (lower downpayment
but more personal equity)
u growing
non-bank and private equity lending (trailing US
trend)
u contracting
lender business (brokers not vital to cross-selling)
u disintermediation
That conversation will reflect on the challenges of the
mortgage market landscape; there’s simply no future in not
looking the profession’s challenges squarely in the eye.
online (increasing consumer sentiment
for ‘no advice’ mortgages)
u internal
migration to high-growth communities (higher
prices, higher mortgages)
Why? Because we live in a time when media can turn on a dime.
u conversion
The recent scandals suffered by Uber, the taxi app company,
are a case in point. When an Uber executive mentioned tracking
competitors and journalists at a dinner party, the remark went
viral. Uber’s reputation took a terrific hit and the rate of adoption
of its app halved in the week of November 15th. The following
week, deactivating the Uber app became the hottest tech
question online; the city of Toronto injuncted Uber.
And we’ll examine goals—financial and otherwise. As one of
the greatest minds France ever produced, the great lawyer
Malesherbes, widely known as the most beloved man in
France despite his time as minister of finance, had this to say
about goals in life: ‘We would accomplish many more things if
we didn’t think them impossible.’
rate well below bank performance (28% vs 55%)
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What does the consumer want?
The impact of social media—particularly the socialization
of shopping research/reviews—cannot be underestimated,
especially for consumers under 35, who grew up online.
While clear-cut trends are still emerging, we can take
note of the following stories the numbers tell from a small
RateSupermarket.ca survey, (https://www.ratesupermarket.
ca/blog/online-mortgage-shopping-right-pro-and-rightprice/) which hint of bigger changes to come.
The 453-person survey RateSupermarket.ca conducted
was designed to identify self-directed mortgage habits. The
findings link to a theme market researchers and data sleuths
here and in the US have been researching quietly for the past
several years: is there momentum in the marketplace the
big banks (and private equity) might exploit for a direct to
consumer mortgage play—built to reduce cost of acquisition.
The survey indicates consumers are increasingly independent
over time, but under specific conditions. While looking for
mortgages, consumer momentum is towards less outside
advice—possibly due to intelligence readily available online.
But this applies to the ‘search’ sequence of the process only,
for now; downstream, the inference is that consumers still
believe mortgage brokers are a valued part of the process
even in online comparison shopping.
This insight emphasizes the relationship-centric model for
brokers: “love ‘em to death” throughout the entire process,
to capitalize on the solid positive sentiment regarding broker
value. But don’t stop there—the real drop-off in consumer
sentiment for brokers is after the deal’s done—then, all too
often, the relationship fizzles for want of attention. Call it the
Case of the Amazing Disappearing Broker.
RateSupermarket.ca’s survey also nailed a misconception:
mortgage comparison shoppers believe they must sacrifice
professional guidance if they go online, with 59% of people who
didn’t shop online saying the main reason is they thought they
needed to connect with a pro. Whether or not this sentiment
is durable remains to be seen; a well-designed comparison
shopping portal—the dealnews.com of the mortgage shopping
experience—could skew things quickly.
It’s worth noting, in considering bias, that RateSupermarket.ca
recently launched a more personalized rate shopping product
which gives mortgage comparison shoppers the option to share
their postal code, which triggers a link to mortgage professionals
in their area. “Finding the perfect mortgage is a team effort,” says
RateSupermarket.ca Editor Penelope Graham. “While consumers
are increasingly willing to explore their options beyond their
home bank, it’s clear that brokers play a vital role in turning
that research into real value.”
Drilling down, there’s a split in market strategies exploring
the validity of this trend.
Ratesupermarket.ca’s betting on its more personalized
take on the rate shopping experience, developing a sort of
hybrid independent model; its biggest competitor, Ratehub,
isn’t pulling any punches, attempting to grow a more direct
to consumer mortgage route, via Canwise, its affiliated
brokerage. (Ratehub’s strategy raises the even more intriguing
question of the future of brokerage networks, especially in the
context of increasingly persuasive big-bank sales teams.)
Here’s the survey
highpoints:
www.ratesupermarket.ca/
blog/online-mortgageshopping-right-pro-andright-price/
62%
56%
79%
of respondents
feel they need
help when
shopping for a
mortgage.
said they
would NOT
go to a bank
for mortgage
advice.
would NOT
turn to family
and friends for
guidance.
47%
58%
46%
said they would
rely on a mortgage
broker to walk
them through
the process of
acquiring a rate.
of shoppers
GO ONLINE
to find mortgage
shopping advice.
stated using a
mortgage broker
to find the lowest
rate was most
important.
Among those who would not shop online for a mortgage,
59% said they felt they needed to connect with a professional.
Another 22% stated they don’t trust online resources, while
19% stated they would prefer to use their home bank’s services.
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The findings boil off into these three
key considerations:
27
%
Canadians said they
still needed help
when selecting
a mortgage
of survey respondents
didn’t think a face-to-face talk
with a mortgage professional
was important
25
respondents said they needed
no help when selecting a
mortgage
%
2015 will see more momentum around this last stat, the
question is—which way?
Will an increasingly younger first-time mortgage seeker look
for convenience and raw rate rather than the more nuanced,
human-centred broker experience? And what of the big banks,
who, if this stat holds water and even grows, will no doubt be
giggling at the prospect of not just lower customer relations
costs to acquire the new business but also at fatter margins on
the initial five-year term—almost always a ‘get‘em in the door’
loss leader for the banks?
Add the growing market share of non-bank lending and the
puzzle gets even more complex. Home bank advantage is
slipping—clearly diminished loyalty takes a bite out of the
big banks’ local mortgage business, not so different from
the survey’s evidence of sliding loyalty to brokers. This trend
is commensurate with the online socialization away from
some bricks-and-mortar transactions. Relationships—are a
different matter. Relationships require facetime, care, feeding
and followup to grow.
Those relationships may well be the competitive response
to the banks’ strategies and the consumers’ fickleness:
demonstrated value that fuels conversations that lead to
long-term relationships—future business.
CAAMP 2014 : Cracks all over the mortgage marketplace—
or just historical blips?
Ratesupermarket’s field work isn’t alone: CAAMP’s 2014
data is laced with subtleties too.
The baseline data is quite stable—except for what appears
to have been a spike in brokered mortgage market
share in 2013, which returned to historical levels (quite
mysteriously, admits CAAMP) in 2014.
But there’s more:
u
Mortgage credit growth in Canada has averaged
8.1% per year during the past decade.
u
The mortgage growth rate has slowed, and is
currently 5.2% year-over-year (as of August).
The growth rate is likely to slow even more, albeit
gradually during 2015 (to about 4.5% by year end).
u
By the end of 2015, total outstanding residential
mortgage credit is forecast at $1.34 trillion, up from
the most recent figure of $1.26 trillion (as of August
2014). By the end of 2016 the figure may be close to
$1.4 trillion.
The tale behind the numbers hangs on two salient trends:
CAAMP emphasizes that the mortgage policies that took
effect in July 2012 continue to have a negative impact on
the housing market and, in turn and in parallel, persist as
a drag on the larger economy.
The evolving marketplace—is stratifying. CAAMP
suggests that simply examining housing indicators
from nationally—the ‘30,000 foot view’— masks wide
divergences across the country.
CAAMP notes that a few major centres have very hot housing
markets, but in many areas of Canada housing markets are
weak, which in turn aggravates the economic stresses on those
stagnant or contracting markets. For these less fortunate
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centres, a blanket government policy designed to cool mortgage
markets is unnecessarily harsh: the continued suppression of
housing activity in the more fragile markets is, CAAMP believes,
unnecessary.
These local fragilities aren’t the only growing
threat to growing mortgage market
volume for brokers in all markets: selfemployment, growing in Canada as
entrepreneurship spreads in the wake
of the 2008 recession (and likely in
response to hard times for orthodox
employers during the subprime
contraction), is one employment sector
hit hard by the 2012 tightening of
mortgage insurance criteria.
The CAAMP data doesn’t shed direct light on the
sentiments of first-time buyers most likely to buy their
mortgages direct; that market is still below the radar in
many respects, save one: while a 20% downpayment has
been rock-steady for first home buyers and personal
savings is still the single biggest source for those
buyers’ downpayments, the composition of that
downpayment may be changing.
OVER 20% OF CANADIANS
ARE NOW SELF-EMPLOYED
Many first-time buyers, facing immense
student loan debt and daunting down
payments (now over $85K nationally) now
and that percentage is rising fast,
average less than a 10% downpayment from
especially in the high-prosperity,
their contribution alone. This number’s even
high in-migration communities
more noteworthy because the trend of parentwhere mortgage business
assisted downpayments has almost doubled in
is booming.
raw number of donations (11% vs 6% five years
Millennials in particular are choosing selfago), if not dollar volume/percentage of house price.
employment rather than ‘a dayjob’; they represent
a significant future mortgage market. The new regulations
Is this a tipping point? Are the new insurance criteria
were designed to eliminate inconsistencies among mortgage
finally taking a bite out of the most fragile market cohort?
insurers, and to focus on toughening underwriting processes,
Here’s some context: http://business.financialpost.
“exceptions” will be the exception, not the rule in future.
com/2014/09/27/first-time-homebuyers-are-feelingthe-weight-of-canadas-housing-boom/. This is one stat to
Over 20% of Canadians are now self-employed and that
watch: it’s the future market, here and now.
percent-age is rising fast, especially in the high prosperity, high
immigration communities where mortgage business is booming.
http://www.theglobeandmail.com/report-on-business/
economy/more-canadians-turning-to-self-employmentin-shaky-job-market/article14717312/
Of course, government regulations are subject to review if
there’s enough noise made in the marketplace to incite the
politicians to action. These latest regulations may well cause
an outcry, which can only help the brokerage business—selfemployed Canadians are particularly susceptible to being
wooed away from a big bank, all too often insensitive to their
particular needs/wants in the borrowing process.
Which begs the question, Mr/Ms MortgageBroker: how best
to attract these folks to a conversation in your office? The
self-employed trend to be more web-savvy, more likely to
use mobile reviews of products and services and—especially
mompreneurs, the “most likely to succeed” self-employed
entrepreneurs of all—they use social media to sell their
businesses. Odds are, you won’t find they’ll respond to a
generic pitch: these folks are the epitome of “what’s in it for
me?” A tailored, carefully designed strategy to entice these
people to “shop broker” will appeal to their native business
sense—and high standards for customer service.
There’s another CAAMP trend worth examining:
almost half the 2014 housing purchases to date
have been by first-time buyers, who tend to be
younger and more internet-savvy—and more
likely to tackle the mortgage process solo, at least,
as noted above, in the exploration phase of the
process, where, to be sure, decisions are made which
influence later outcomes; not to approach one’s
home branch for advice viewed as “not as objective”
as one’s own research online.
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Compare and contrast this with
RateSupermarket’s much smaller sampling
results and an intriguing inference bubbles up:
as the mortgage market grows ever younger and
more expensive in the markets that matter, what
are the prospects for increased broker deals?
The answer for brokers is net net good, at least for
this younger segment: they tend to seek information
later in the process, after their own research and
they’re especially sensitive to quality of relationship
issues, valuing personalization over almost all
demographics CAAMP examined.
To wrap up
the CAAMP findings,
consider this:
71%
of all borrowers consulted
a bank representative
about a mortgage but only
All the relevant marketing
communications/brand loyalty
statistics and surveys COMPASSpoint
examined bear the identical message
for 2015 for mortgage brokers:
invest in a disciplined marketing
communications strategy—and
stick to it.
It’s one thing, the data shows, to
fund a mortgage seamlessly. It’s
quite another to build a business
of all borrowers consulted
about repeat business because the
a mortgage broker.
follow-up to that ‘seamless success’ is
memorable, shareable, and likely to
But there’s a catch (there’s always a catch).
be networked by happy mortgagees.
The catch is that there’s no demonstrated one-to-one relationship
In this sense, the profession, by all accounts, has a long
between what may be a trend towards disintermediated
way to go in professionalizing communications. In fact,
mortgages, some movement, scale yet unknown, in big banks’
marketing dollars the big banks throw at new business
cost of acquisition (which as noted above, may be falling), and
may be the single biggest signal that mortgage brokers
the big picture of internet-based market intelligence and peerhave to tell their story much, much better.
to-peer reviews making for a much more sophisticated and
independent first-time buyer. These first-time buyers are ripe for
Communications are the single best test-case for where
relationship marketing: it’s what they know online and on their
mortgage business is coming from. Potential clients
phones from the brands they trust and buy from.
give all sorts of signals—and thus give a broker a clear
sense of what in the monthly pipeline is most likely to
To wrap up the CAAMP findings, consider this: 71% of all
fund—in communicating with their broker, signals that
borrowers consulted a bank representative about a mortgage
a professional communications approach will capture by
but only 45% of all borrowers consulted a mortgage broker.
vetting responses to phone calls and emails in context.
If this is a valid statistic—and 2015 will tell the tale—less than
If there’s one resolution mortgage brokers of all stripes
half of Canadian mortgage consumers are availing themselves
ought to make for 2015, it’s to track—religiously—the
of a free scan of the marketplace by a trusted professional,
status of leads on the one hand and to commit to tracking
a massive opportunity for brokers and broker networks to
clients after the deal. Consistent consumer insight data
open up to consumers and demonstrate real value...and real
demonstrates that brokers lose far more repeat business—
relationship skills.
after delivering solid service and clear value in the deal
itself—by simply waving goodbye to their client for five
The communications piece: my customer…where’d s/he go?
years.
Like golf, the mortgage game is all about the
followthrough.
45%
Each and every new homeowner is at the head of a network
of referrals just waiting to be activated. But for want of a
cogent client communications scheme, these great allies
are all too often lost and, with them, the future loyalty of
the folks they influence with their endorsements. A few
simple website value-adds, such a closing costs template
or six mortgage option ‘smart tips,’ in combination with
an email/phone call annual checkup says transparently I
value your business and opens the door to true customer
education and an even better relationship connection.
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But there’s far more to investing in a website than this: hiring a
designer who understands the details of not just your business
but the business of communicating that business quickly
and usefully to the website visitor is dead critical. Or you can
design your own site, using templates subscription sites like
squarespace.com, which features great design and easy editing.
Remember this, however: your website’s telling a story—think
that story through before you (re)design your site. One terrific
resource for website design for independent brokers is http://
www.websitebuilderexpert.com/.
A final hint: start a blog and keep blogging religiously; all
research about content marketing shows clearly that a wellexecuted blog has a profound effect on your visibility as a
brand, the likelihood others will quote you as an authority,
and the strength of your referral network. Here’s a great
sampling: http://paper.li/mortgage_centre/1390782169.
Looking ahead to 2015? Mortgage brokers are all too often
Type A people, driven, ambitious and strong-willed. The
paradox is that the personality traits research demonstrates
mortgage clients want is personable, accessible and relaxed.
Now there’s New Year’s resolution list-starter, right there.
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We’re already planning our next COMPASSpoint
but we’d love to hear from you with comments,
criticisms, praise or questions. Email us at
[email protected]. Thanks for reading and all the
very best for a prosperous and rewarding 2015.
ANNUAL
BROKER
REPORT
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FCT refers to the FCT group of companies, which includes First Canadian Title Company Limited, which provides real estate related services. This information is provided for your general reference/interest and is in no way intended to make any representation
or professional advice to you with respect to the information presented above.
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