Shifting economic environment has seen clients' needs change, says broker
As Canada’s housing market unexpectedly took off at the onset of the COVID-19 pandemic, mortgage agents and brokers saw purchase activity shoot through the roof amid rock-bottom interest rates and borrowing costs.
That homebuying boom gave way to a pronounced market slowdown after the first quarter of 2022 as the Bank of Canada embarked on a series of aggressive rate hikes in an effort to quell inflation, with its trendsetting rate ballooning by a full 450 basis points over the past 15 months.
Surging rates drastically reduced affordability for scores of prospective homebuyers in Canada’s housing market – and for many existing homeowners who had taken advantage of record-low variable rates at the height of the pandemic, a spike in mortgage costs also presented huge challenges.
That’s seen a big change in the typical types of client queries that agents and brokers are fielding, according to a Dartmouth, Nova Scotia-based broker.
David Clarke (pictured top), president of the Clarke Mortgage Group, told Canadian Mortgage Professional that his team had focused on an advice-driven approach over the past 12 months, a strategy driven in large part by the eagerness of many customers to discuss their mortgage options with an expert amid a shifting landscape.
“It has been a change. I’ve never experienced clients reaching out for advice as much as I have over the last year,” he said. “They’re scared and they want to talk about it. And it’s a very willing conversation.”
That goes both ways, with Clarke also making regular contact with his book of clients to make sure their mortgage needs are being addressed and that any of their uncertainties or apprehensions are dealt with.
“I’ve been reaching out to my database to say, ‘Hey, let’s check in,’” he said. “People are pretty eager to check in. I think [they’re] worried, they don’t know what the solution is.
“Unfortunately, it’s not a perfect answer for people to give them a solution because it’s a little bit up in the air with what’s going to happen with rates and stuff like that. But it’s been a different environment, and I’m doing way more refinances than purchases right now.”
“We’re seeing a lot more alternative, private, and MIC lending,” Benjamin Sammut, president and broker of record at Rover Financial, told Canadian Mortgage Professional.https://t.co/0osTd4e4w4#mortgagenews #specializedlending #lending #mortgageapplications
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 28, 2023
Why education is coming to the fore for mortgage brokers
Top of mind for Clarke in that climate has been providing clients as clear and concise a rundown on the complex economic outlook and what it might mean for interest rates – and, ultimately, their mortgages.
While the Bank of Canada appeared to hit pause on rate hikes in two consecutive announcements in March and April, it resumed its rate-increasing trajectory in June with a 25-basis-point hike, with another expected for July.
Providing borrowers with the most accurate and up-to-date information on those developments is essential – and being able to offer a variety of solutions tailored to each individual circumstance is equally important, according to Clarke.
“I’ve been focusing a lot on just educating – making sure I talk to people, but even the social media videos that I’ve been doing have been education-based,” he said. “What I find is helpful for clients right now is that sometimes the right answer for them isn’t the one they think they’re supposed to say.”
The value of having a frank conversation with clients
Borrowers might initially rule out a certain type of solution without realizing that it can be the right one for them to help lower their payments or manage financial stress, Clarke added.
“Sometimes I feel like clients [think they] shouldn’t extend their amortization because it’s going to mean they’re going to pay more interest and it takes them longer to pay off their house,” he said. “Sometimes by me even saying, ‘That’s OK, for the next two or three years it’ll help you get your monthly payment down and ride out this period,’ they’ll say, ‘OK, I want to do that.’
“They almost think they’re supposed to tell their broker the cookie-cutter answer. So I’ve been reaching out to people and saying, ‘Hey, it’s OK to be worried about this. Things are expensive.’ And I find they’ve been liking the conversation.”
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