Rates are falling, but borrowing costs are still high. Here’s how brokers and their clients are coping
It’s no secret: these are challenging times for many Canadian homeowners, even with interest rates on a steady downward trend in the second half of 2024.
Mortgage costs have surged over the past two years, seeing monthly payments spike for scores of borrowers and with a wave of renewals at much higher interest rates looming into sight.
For mortgage brokers, that’s prompted a slew of calls from clients worried about the stress of managing their mortgage – but it’s not all doom and gloom for those borrowers.
High-profile brokers took to the stage at the recent Mortgage Professionals Canada (MPC) conference in Montreal to discuss strategies for guiding borrowers through the current rocky landscape, with the value of top-quality advice coming to the fore.
David Larock (pictured, top left), a broker with TMG The Mortgage Group, noted that clients often assume the worst and believe there are few solutions to their predicament – but that’s rarely the case.
Running the numbers to find out if borrowers can save any money by refinancing, he said, often sets minds at ease. “I find when I talk to my existing clients, they’re seeing headlines saying rates are double, rates are triple, and they think their payments are going to double or triple,” he said.
But when clients have already paid some of their mortgage down, “even though rates have gone up, maybe their rates have doubled – their payment’s not going to double,” he added. “Their payment [might] go up by 30% and if their income is still pretty good, then maybe we can re-expand their amortization and get them up for 30 years, and maybe make the same rate a little lower.”
The response after those conversations is one of relief, Larock said – and that’s beneficial for broker and borrower alike. The broker may not be making money or originating a new deal on those types of query, but they’re delivering value and setting themselves up for future success. “I’m not getting a mortgage on that call, but you better believe that they’re going to have a good conversation with their spouse about what I said to them – and they’re definitely coming back to get a renewal,” he added.
“It feels great to help people who’re dealing with a situation where the headlines are not accurately representing the impact we have. If you’re looking for opportunities to deliver value right now, you’ve got the time to do it. It is, in my opinion, the most valuable thing you can do with your existing client base.”
Despite soaring housing prices and economic uncertainties, Millennials and Gen Z Canadians are holding onto their aspirations of homeownership, according to the latest Scotiabank Housing Poll.https://t.co/G8zIghRCDE
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 31, 2024
Why having the right type of conversation is key
Empathy is the name of the game for brokers – especially when it comes to having a conversation that’s potentially an awkward one for clients, according to Jill Moellering (pictured, top middle) of Mortgage Architects.
Constantly top of mind, she said, should be the fact that “nobody in the world wants to pick up a phone and call a stranger and tell them that they can’t afford their lifestyle… or that they’re in a financially stressful situation. Nobody wants to admit that. “So it takes a lot for a client to phone you and say, ‘Yeah, I’m stressed about my payment.’”
It might be natural for the borrower to assume that the best solution to their problem is trying to change to the lowest possible interest rate – but that’s not necessarily always the case.
Asking the right question and understanding a borrower’s unique circumstances, according to Moellering, are the most important steps a broker can take in those scenarios.
What’s more – while the borrower might feel down or anxious about their own financial predicament, it’s unlikely that they’re the only person facing those struggles. “When we start asking a few more questions and you get into it a little bit more and you build rapport and have empathy to people, you’re going to start to get more and more of those answers,” she said.
“I have a lot of situations where I’ve had those conversations with the clients, and I [ask]: ‘OK, what are you more stressed about? How do you feel? Are you just looking for the lowest interest rate, or are you kind of concerned about your payments? Are you concerned about your debt load?’ When you start to dig in and start asking a few more questions… that’s when you can start to say, ‘Hey, you’re not alone in this.’”
Philippe Béland (pictured, top right), a broker at Consortium Hypothécaire, reinforced the need for brokers to communicate clearly with clients and set their minds at ease where uncertainty or anxiety might prevail. “Information is key,” he said, “and people rely on us to digest information and make something intelligent out of it in terms of advice.”
For Clinton Wilkins (pictured right below) of the Clinton Wilkins Mortgage Team, emphasizing the point that the best rate isn’t always the best option for clients is doubly essential. “That’s what we need to remember as an industry: sometimes, clients… are calling you for a transfer or a renewal. What they really need is a refi,” he said.
“They need an enhanced transfer with a long period amortization. They need a refinance. The lowest rate isn’t always the best rate for the customer. It’s really very product specific.”
Better times on the horizon for brokers and borrowers
The good news for brokers and their clients? Rates are likely to continue falling in the months ahead – and by spring or early summer of 2025, rates in the threes for both variable and fixed options will probably come into view.
Brokers should be primed for that reality, according to Ron Butler (pictured left below), founder of Butler Mortgage Inc. “Get ready. Don’t wait for this customer to wander off,” he said. “Review your database. Figure out everybody who’s in the high fours and fives. Be prepared to give extremely honest penalty analysis. Let them understand exactly what it is.
“Don’t wait for renewal; people who are in a rate in the fives who have access to a rate in the threes are going to be interested. We just have to do it honestly, correctly – do it the right way. Make sure they understand exactly what they’ll pay as a penalty. Show them exactly what kind of savings they could have. You need to be poised and ready to have that database tuned up so when they day comes, you can start going and there will be money made.”
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