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Bozic on Rates, Strategy & Competition

Boris-BozicThe future of variable rate pricing; value versus rate; and competing to win.

These are topics that Merix Financial CEO Boris Bozic hit on in an informative webinar hosted Thursday by 180 Degrees Coaching’s Greg Williamson.

Boris’s position as head of a major non-bank lender keeps his finger on the pulse of broker performance, lender practices, capital markets and rate trends. He shared several candid perspectives and these were some of the important quotes and takeaways (our comments in italics):

Mortgage Rates

  • “We’re going to be in an environment very shortly where we’ll be prime-plus on variable-rate mortgages,” Bozic said.
  • “This is the new normal for the foreseeable future.”
  • “The days of [prime – 0.60% or better] are behind us.”

  • Increased regulation, including IFRS (which officially takes effect at banks next month), is raising mortgage capital costs.
  • That added cost is being “placed on consumers.”
  • “I highly doubt that we’ll go back to [pre-crisis] mortgage discounts,” he said.

Mortgage Funding

  • Non-bank lenders rely on banks for much of their funding. Fortunately, “there will always be a supply chain” to fund non-bank lenders, he said, because banks “want to get their money out” and earn a return.
  • Banks have greater capital resources and don’t have to be as choosy with their customers as a monoline lender like Merix Financial (which relies on securitization and Canada Mortgage Bonds and has a “finite limit” of such funds).
  • “The name of the game going forward is customer retention and (franchisable) customers” (i.e.  customers who can be can be cross-sold a range of non-mortgage products)
  • “In the next 12 months, all the banks will invest even more in their proprietary sales forces.”

Value Versus Price

  • In today’s mortgage market, “We’ve replaced the word ‘competitive’ with ‘cheapest’.”
  • Many brokers associate themselves with brands like Prada, Mercedes and Porsche, but “market themselves like Walmart.”
  • “Interest rates matter a great deal. There’s no doubt about it…(But) eventually, someone can always be cheaper than you are.”
  • Lenders have been forced to create “quick close” programs “because we’re constantly told we need more competitive rates.” Reducing rate hold periods to 30 days lowers costs 5-10 basis points, Bozic added.

Changing Our Paradigms

  • Going forward, “It’s all about the customer experience…You need to re-engineer. You need to come up with a different experience for your customer.”
  • People pay $5 for a Starbucks coffee largely for the experience.
  • “Spend all of your time thinking, How  can I be different?
    (Greg Williamson added, “The primary thing people are shopping for is value and information.” He said brokers have an edge over banks in that respect.)
  • In a comment he admitted was controversial, Bozic said: “One of the things that has to change is our mindset….We have to move away from being consumer advocates to being business people.”
    (That was admittedly somewhat surprising but we know what he means. Ideally, brokers can continue as both consumer advocates and successful businesspeople.)
  • “We’re in the business of mortgages.” We’re not in the business of giving “free advice,” said Bozic
    (Apart from initial consultations, that’s true. Investment advisors, accountants, and other financial practitioners perform valuable services and incur expenses. They obviously can’t afford to misuse time and work for free, and neither can mortgage planners.)

Consumer Awareness

  • The mortgage broker industry could benefit from a greater investment in consumer awareness.
  • “If every broker was to contribute 1 bps (from every closed deal) that would equate to $5.5 to $6 million a year,” which could be leveraged in a national broker ad campaign.
  • Consumer awareness campaigns have been pivotal in other sectors, such as the insurance industry.
  • If we don’t do something like that….“we should be content that our market share will remain around 20-25%.”


180-Degrees-CoachingSource: The quotes above appeared in a seminar produced by 180 Degrees Coaching. For more information see:


Rob McLister, CMT