There's always another way to look at something, says one agent, and BMO’s 2.99 may actually be a compliment to brokers – the originators it left behind in 2007 and is now desperately struggling to catch up to.
“Take note of the hoops BMO is having to jump through in order to get back originations it lost after leaving the broker channel,” says Rob Campbell, an agent with Verico The Mortgage Wellness Group. “Absolutely, it is a validation of the broker model.”
BMO’s move to re-introduce its controversial 2.99 per cent interest rate on a five-year fixed has riled brokers and banks alike. But it also speaks to the challenges the bank has had in re-growing the level of originations it enjoyed while partnered with mortgage brokers.
The bank has watched its share of the mortgage biz drop from about 10 per cent in its 2007 heyday to today`s 6.5 per cent, according to its own stats.
BMO is focused on recapturing those glory days, treading out the same rock-bottom rate it first introduced in January.
That earlier promotion – meant to increase originations at the tail-end of the financial year – failed to win the bank the kind of year-over-year gains that other big banks won last year. At the same time it raised analysts concerns about the bank’s profit margins on mortgages.
Ironically, protecting those spreads was one of the reasons the bank left brokers behind in 2007, something CIBC is now preparing to do.
The FirstLine owner should perhaps consider BMO’s situation before exiting the channel, said Campbell, an agent based in Guelph, Ont.
“I wasn’t in the industry when BMO was in the broker channel, and I’ve never used FirstLine, he says, “but BMO’s experience may be a cautionary note to CIBC. BMO might also want to look at the great opportunity that CIBC’s departure offers it or another powerful lender to come back and fill that void.”
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