Brokers have a battle on their hands
As mortgage brokers sharpen their tools for a likely uptick in purchase activity and a renewal wave in the coming 12 months, banks are also gearing up for a busy 2025 – with one of the most competitive markets for years potentially in the cards.
The best rates offered by Canada’s banking giants indicate top lenders are preparing a “super aggressive” approach into the new year, according to Ontario-based broker Tracy Valko (pictured top) of Valko Financial, who told Canadian Mortgage Professional the broker space currently has a battle on its hands to compete with banks on rates.
Brokers continuing to expand market share in that environment next year will be easier said than done – but for Valko, the challenge begins with establishing a value proposition that clearly differentiates the service offered by brokers from that of the banks.
That means a focus on education, education, education, she said. “I think we’re further ahead on that in the broker space,” she told CMP. “Banks are very transactional. It’s just about rates and it’s not so much about the education piece. I think they have a lot more movement with their staffing, so the relationship they build with the clients can be very short-term and I can see that some clients are frustrated with it.
“They want the service. They want the support. They want to know someone’s there. I truly believe in education – I think that can outplay rate by far. You just have to make sure you’re consistent in that messaging.”
Communicating broker value to clients more important than ever
Competing with banks in the year ahead will also mean highlighting to borrowers how the broker space is better equipped to help with their unique financial needs and specific circumstances, according to Valko.
That’s especially relevant in the current market as the type of application and income declaration favoured by Canadian borrowers continues to evolve – even as bank qualification criteria remains strict.
Based on preliminary November data, Canada’s housing market is ending the fall season on a stronger footing, according to RBC economist Robert Hogue. https://t.co/tDy8VGMm22
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 6, 2024
“What’s niche in the broker space is that we have an umbrella of products and opportunities to help people come out of foreclosures, help people that have debts and don’t qualify for the cookie-cutter bank deals,” Valko said.
“You have to remember that bank deals have got to fit in this square peg. There are no exceptions on that. And a lot of people don’t have that type of standard employment and standard credit anymore, so that’s why a broker comes into play.”
Borrowers might naturally gravitate towards the bank as their first choice, but the reality is that many will have little other choice but to seek alternative options because of rigid qualification criteria.
That will work in brokers’ favour and counteract to some extent the better rates on offer from banks, according to Valko. “At the end of the day, the client is going to be appreciative – not only of the experience, but that we actually helped them out and got them into a home,” she said.
“So I think we can’t get frustrated and deflated by these rates that the banks are doing because we have so much to offer as brokers and at the end of the day, if you’re their last choice coming to them, you’re probably going to be the one they’ll stick with because you’re able to find a solution and you’ve given them the opportunity of homeownership.”
Why are borrower types changing – and why is that an opportunity for brokers?
The rise of the gig economy and growing prevalence of self-employed Canadians have been two major trends to impact the mortgage market in recent years, meaning the conventional ways of submitting income declarations for mortgage applications are no longer as common as before.
The bank space has been slow to react to that reality, Valko suggested. “In Canada, [many people have] got multiple jobs to be able to make ends meet,” she said. “A lot of times it’s not permanent, full-time – it’s casual, it’s seasonal, it’s online income. It’s very unique stuff that the banks haven’t conformed to and will not accept that type of income.
“So we have to look at other opportunities in the alternative space. Even some of the monolines have some really good self-employed programs that we can help people get into. And this is where you excel as a broker. You’ve got to know your products, you’ve got to understand, and you’ve got to be able to pivot when you’re speaking to clients.”
Staying attuned to those difficulties some borrowers can face with banks – and being prepared to offer fresh solutions – can be a potent way for brokers to flourish in 2025. “I think that’s going to be a big driver going into the new year. More of the younger generation are not doing just one job,” Valko said.
“They’ve got multiple careers and they’re managing differently. If you can piece that together for them and are able to get them into a mortgage, that’s a huge win.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
