With all of the mortgage hype happening this fall, you may be wondering whether or not working with a mortgage broker is still the right move for you. If you’re a Canadian homeowner – or are looking to become a Canadian homeowner – then you’ve almost certainly heard of the mortgage restrictions
that are being implemented. (If not, or if you’ve had your head in the sand about buying a home, then it’s time to face the music and read about what those rules are
and how they may affect you
You may already have an idea of how these rules will impact your mortgage options, your mortgage renewal, and/or your particular housing market, but one aspect you may not have considered is the role of your mortgage broker in all of this. After all, one of the biggest benefits of mortgage brokers is that they’re able to shop around your mortgage application to a wide variety of lenders. If some of those lenders are no longer able to get mortgage insurance and finance their mortgages, then they may close, thereby limiting your broker’s – i.e., your – options. Many mortgage brokers think it’s a huge blow to their industry, and to the consumer.
Others, however, don’t see it that way at all.
Dave Butler is a second-generation mortgage broker who shrugs off the latest restrictions, saying that they makes the job of brokers much more what it should be.
“We have to do our jobs,” he says. “I don’t think any of this hurts us, I think it puts us in a better position.” He says that if some of the smaller lenders bow out of the business, then brokers will simply have to strengthen their relationship with the existing lenders.
“Having more options is great, but at the end of the day, from a lender’s standpoint, they have to be viable options.” In theory, all of these lenders are options that consumers and brokers are able to choose from, Butler says, but he also questions whether the lenders who may end up bowing out of the mortgage game would have eventually done so anyway, even without the latest round of mortgage rules. Some of these lenders may have been guilty of driving mortgage interest rates so low in order to get more mortgages on the books, and then insure them on the back end to investors. Either way, what feels like an earthquake now may seem like a mild tremor in hindsight.
“These are very minor changes, in my opinion, as far as the overall landscape. I really do think that’s a positive thing for us,” Butler says.
Another way to think about it is that with regulations getting stricter, there may be fewer lenders in the marketplace, but it’s also more important than ever that your mortgage is brought to the right lenders, that your application is packaged properly, and that you work with an experienced mortgage broker who knows how to do just that. In essence, the changes are making your mortgage broker work harder for you.
Ann Brill, owner and principal broker for Centum Metrocapp Wealth Solutions Inc., agrees with Butler that new rules and tighter regulations don’t change much of anything for mortgage brokers and their role in the mortgage industry.
“You just go with the flow. There may be some lenders that are leaving, but maybe they should’ve left already. So I don’t see that as such of bad thing.”
Brill has been in the industry for 15 years, and, like Butler, has seen many changes over the years. Some of these changes have affected how lending works on the back end of deals, which consumers don’t see.
“Even though we have a ton of lenders to choose from a lot of times, in order to do what you do well and now with all the changes in the industry in terms of efficiency and certain volume funded, you really have to hone in on four or five ‘A’ lenders, four or five ‘B’ lenders, and really give them the business you need in order to get the service you want,” Brill says.
So while there may be 30 lenders available, your mortgage may only be shopped around to say, 10. But when you think about those 10 lenders being the best of the 30 – and compared to only a couple of options if you walk into a single bank branch for a mortgage – it doesn’t seem like that bad of a deal after all.
That being said, the scales have indeed been tipped in favour of the big guys.
“It certainly puts the banks on a higher, less even playing field for sure,” Butler says. “But as any good broker, some of their business – at least half of it – should be going to some of the big banks because there are products that they offer that consumers need.” HELOC
s, for example. Some of the changes are hitting harder in some areas than in others, and while policy makers in Ottawa may certainly have targeted their primary objectives, such as reining in out-of-control housing markets, they may have had some secondary objectives in mind as well.
“Like the government has kind of decided they’re going to weed out a bit of the fringe buyers clearly with their decisions and their moves, maybe they’re also trying to weed out some of the fringe lenders,” Butler says. “That could be also part of their narrative. Who knows?”
The short term consequences may pinch a bit, especially for homeowners who like seeing the value of their homes increase rapidly over relatively short periods of time. But, even with speculation of a market crash cast aside, the markets that are growing so quickly aren’t doing so at a sustainable rate. Butler called the returns of the past couple of years “scary.”
“The last two years – this activity is not right,” he says. “It’s nice if you’re selling a home to know that you’re going to have a bidding war on your home and it’s going to go for 100,000 over asking price. But the truth is, there’s no economic model that you can look at that says that’s good, these are good things. No, I’d rather go back to the activity of 2014 when you would list your home, you would get normal activity on it, and it would sell. This whole thing of people’s values of their home going up 25 per cent every year when income is not going up at that level, it’s not good for our economy.”
In some instances, your parameters for getting a mortgage may not have changed at all – or the situation has changed to your advantage. If you’re an investor, for example, your mortgage broker would pretty much be doing business as usual, since you would already have to put down that 20 per cent down payment if you’re not occupying the property as a primary residence. If there are fringe buyers being taken out of the purchase market, then chances are they’re going to end up renting, and putting cash in your pocket.
In actuality, the role of mortgage brokers remains the same, as does the advantage that they have over the mortgage specialists at the banks. Mortgage brokers still have many more mortgage products available to them that you can use to your advantage. Maybe this will change in the next round of mortgage rule changes, but for now, a broker is still your best guide on the road to home ownership.
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