According to a recent Maritz poll, if you ask a new broker you’ll generally be quoted a lower rate than if you asked a veteran broker.
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Maritz’s survey seems to show a clear link between the rate quoted and a broker’s years of experience. Newer brokers, for example, define “good rates” as being half a percentage point less than brokers who have been in the business 20+ years.
“In the last 4 years the focus on rate has become more significant,” Gary told us.
He said that’s likely due to “intensified competition from banks” and greater availability of rate information in the media and online.
“This, in turn, has led our newer brokers to focus more on that one aspect of the transaction, whereas more experienced brokers are able to satisfy the mortgage consumer by providing a complete service package where rate becomes less important.”
Jim Murphy says newer brokers sometimes quote more competitively because they have “less experience with other mortgage terms or features, including things like portability or prepayment options.”
That makes it harder for novice brokers to give guidance on the pros and cons of those terms and features. Many, therefore, gravitate to what is easiest to compare: rates.
Gary notes another key fact in that, “More experienced brokers also get more repeat customers who value the relationship with their broker.” In those cases there is “less focus on rate,” he says, “and more on the overall fit of the deal.”
In a similar vein, Jim says, “While rate is important, perhaps more experienced brokers are providing advice and expertise—(which is) an emerging market trend that differentiates the broker.”
One area where expert guidance truly pays off is with term selection. We sometimes sound like a broken record when we say this but it’s true: Getting the best rate can save you hundreds but choosing the wrong term can cost you thousands (Thanks to Calgary broker Judy Shilmar for teaching us that way back when…). Improper term selection almost always amounts to more interest lost than a 10-20 basis point rate advantage up-front.
We’d also point out that even though seasoned brokers might feel their service is worth a higher rate, that doesn’t mean they will not quote aggressively. The competitiveness of your broker or banker is totally dependent on the individual.
What’s more, established brokers often have the best volume-based “status” with lenders. That’s key because great rates often (but not always) require such status.
In closing, we asked Gary point blank if he thought consumers get better rates through newer brokers. He very correctly pointed out: “Within our industry, most brokerages have access to the same lenders with the same products and rates; so I don’t think those using a newer broker would necessarily get a better rate.”
All told, interest rates are but one part of the mortgage puzzle. There are any number of mortgage restrictions that can make a low rate far more expensive than you bargained for.
“Most experienced brokers, and consumers themselves, agree that there is more to a mortgage than the rate,” said Gary. “There is value to the consumer in getting good advice, in the ability to review more than one product option and in the convenience of one-stop shopping, to name a few…”
Sidebar: The above notwithstanding, it’s our personal observation that brokers who are engaged in the Internet and track the rate market closely are generally the most competitive with advertised rates. That anecdotal finding is based on the dozens of broker websites we monitor when creating our own internal reference rates. When juxtaposed to the advertised rates of long-standing brokers we follow (who we won’t name), there is often a 20+ basis point rate difference. Hence, to the extent that net-savvy market-engaged brokers are newer brokers, Maritz’s findings are not surprising one iota.
Rob McLister, CMT
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