New Data on Old Perceptions

Self-perception can sometimes be at odds with how others perceive us.

New data from Maritz underlines that and challenges common views of how:

  • Consumers see mortgage brokers
  • Mortgage brokers see lenders

…and vice versa.

On Monday at the CAAMP Forum, Maritz researcher Rob Daniel presented an array of stats on how people think in the mortgage business. We’ve summarized them below. (Our views in italics. Key data in green.)

The findings that follow are based on a recent survey from Maritz of 2,000 Canadians.

Among consumers who were polled:

  • 80%: Say mortgages are “good debt”
  • 61%: Say “now is a good time to buy real estate”

By contrast, a whopping 88% of industry participants say now is a good time to buy.

“We’ve got a radically different view from the person sitting across the desk,” says Daniel.

This industry bias may stem from:

  • a better understanding by professionals of the long-term value of owning (which includes other benefits besides the “investment potential”)
  • professionals rejecting the effectiveness of market timing
  • delusion or consumer deception in some cases.
  • 83%: Are “comfortable” with their loan-to-value.
  • 77%: Say “low rates mean that many Canadians own homes who shouldn’t.”

We’re comfortable with our risk levels, but not with others’, says Daniel.

Mortgage Stats

  • 83% of homeowners have 25%-plus equity
  • Only 8% took equity out of their home in the past year
  • 5-7 Years: The average amount of time that Canadians shave off their original amortization by doing things like making prepayments
  • 80% say they can affordably handle a $200/month increase in their mortgage payment (The average tolerable increase is $800 more a month, says Daniel)

Reasons people use brokers:

According to Maritz, there is no dominant reason why people use mortgage brokers.

That said:

  • 36% say getting the best rate is their #1 reason

Interestingly, an RBC mortgage poll last year found that 96% of consumers say the lowest rate is the #1 mortgage differentiator.

Here’s a table showing the rest of a broker’s value proposition, as seen through the eyes of consumers:

Reasons-to-use-mortgage-brokers

(Click to enlarge. Source: Maritz/CAAMP)

Consumer Satisfaction

  • 61%: Were not completely satisfied with their latest overall mortgage experience

“Trustworthy advice” is the #1 driver of mortgage satisfaction, says Maritz. “Personalized service” is second.

  • 43%: Were satisfied with their lender representative
  • 51%: Were satisfied with their mortgage broker

Maritz says wide product selection and good post-sale contact are the key drivers that affect loyalty to brokers. Just 9% of brokers make the right amount of contact with their clients after closing—which Maritz defines as 4-6 times per year.

  • 59%: Were “completely satisfied” with the mortgage they received from an AMP-accredited mortgage broker
  • 35%: We’re “completely satisfied” with the mortgage they received from a Non-AMP mortgage broker

AMP satisfaction may be due to those AMP brokers being more committed to their profession, says Daniel.

  • 43%: Percentage of broker customers who say they would consult a broker on renewal.

Daniel says this number is concerning. As a market researcher, “I’d cut that number in half,” he states.

Mortgage Rule Changes

  • mortgage-rules-201259% of consumers say new mortgage regulations will have a positive impact on the housing market (Only 37% of the industry says the same thing.)
  • Half (49%) of the mortgage industry and 74% of first-time buyers say regulatory changes will harm the housing market.
  • Just 16% of industry participants say the new mortgage regs will have a positive impact on their business

Broker market vital signs

  • 25%: The market share for brokers (This hasn’t changed drastically in seven years, Daniel says)
  • 60%: Percentage of consumers who do not have a good or full understanding of broker services

There’s loads of opportunity there if the industry can find a unified and economical way to boost consumer awareness—which is far easier said than done. Social media is one weapon we have, and one that lender reps use significantly less effectively (possibly due to compliance and corporate restrictions).

  • 68% of consumers say brokers are good for first-time buyers

Brokers are good for everyone, Daniel states.

  • Yet, only 25% of consumers said brokers were “good for me”

Not surprisingly, this ratio happens to be the same as mortgage brokers’ market share.

  • 36% of consumers say brokers are good for people in a “healthy financial position”

These previous two stats show how much the brokerage industry needs to broadcast its value proposition from the rooftops.

  • 35% of consumers say they’re “opposed” to using a broker (The #1 reason: “Loyalty to banks”)
  • 87% would rather have their mortgage with their “current bank” as opposed to “another financial institution”

But here’s the key. Only 5% are willing to pay a higher rate to get a mortgage with their bank. It’s no coincidence that banks do so much rate matching these days.

Brokers and Lenders

  • profitability62%: Percentage of brokers who say lender profitability is “healthy”
  • 36%: Percentage of lenders who say lender profitability is “healthy”

Either way, online competition will eventually force greater discounting and make it more “unhealthy.”

  • 33%: Percentage of lenders who say they “own” the borrower relationship
  • 44%: Percentage of brokers who say they “own” the borrower relationship

Does anyone really have to “own” the client? Either the mortgage originator or the existing lender will offer the better value at renewal (and not just rate, but features, advice and flexibility). That party, or a new lender that delivers the same, should win the privilege of the client’s business for the next term. It doesn’t need to be any more complicated than that, but self-interest makes it so.

Most important factors for brokers choosing lenders

  1. Underwriter support
  2. Service from submission to closing
  3. Speediness of approvals

All of these should be givens at any lender in this competitive market, but they’re not—which is why they’re on this list. Assuming good service at origination (which is a short-term need from the client’s perspective), the #1 differentiators should be rates, features and restrictions. Those are what borrowers care most about overall—and it is clients’ long-term needs that should drive a broker’s choice in lenders.

Near the end of the session, Daniel reminded the audience that debating housing and mortgage topics takes objectivity. We all need to approach mortgage issues using an “evidenced-based balanced view,” he said. But we all know that being truly informed takes effort. Those of you out there who relentlessly self-educate should be proud of yourselves for making that effort.


Rob McLister, CMT

  1. Any info or stats on the demographic of respondents or breakdown amongst age groups? I ask because I suspect the unwillingness of people to use brokers because of ‘loyalty to the bank’ will change dramatically as Gen Y/Millenials start to buy.

  2. This industry bias may stem from:
    a better understanding by professionals of the long-term value of owning (which includes other benefits besides the “investment potential”)
    professionals rejecting the effectiveness of market timing
    delusion or consumer deception in some cases.

    Really? You don’t think that perhaps that the industry’s entire existence depends on people continuing to buy has a small effect? Silly deluded consumers thinking that it might not be the best time to buy. If they only were more informed.
    Only 8% took equity out of their home in the past year
    8% seems like a lot. By what basis do you attach the qualifier “only”? Is it significantly less than in previous years?
    5-7 Years: The average amount of time that Canadians shave off their original amortization by doing things like making prepayments
    But that’s not the real story about pre-payments. CAAMP reports that mortgages used to be paid off in 2/3 the original amortized time, now they expect current mortgagees to require 4/5 of the time.
    Just 16% of industry participants say the new mortgage regs will have a positive impact on their business
    Any of those 16% want to comment here? How could removing buyers be positive for their business? I assume they were thinking long term?
    35% of consumers say they’re “opposed” to using a broker (The #1 reason: “Loyalty to banks”)
    This is shocking to me. Why anyone would feel loyalty to a bank is absolutely beyond me.
    Daniel reminded the audience that debating housing and mortgage topics takes objectivity
    This coming from the guy who says such hilariously objective things like “Brokers are good for everyone”.

  3. Rob another great analysis. Huge issue when ” 60%: Percentage of consumers who do NOT have a good or full understanding of broker services” I watched the online broadcast from the Forum on Monday and there was great discussions about how the industry needs to work better to improve consumer awarenesss of what a broker does. As a former lender and broker, I am curious what % of AMP today are brokers versus an employee of a lender or insurer? Rob do you know how many brokers are registered in Canada in total?

  4. Hi LS,
    > Re: “Really? You don’t think that perhaps that the industry’s entire existence depends on people continuing to buy has a small effect?”
    That’s what I meant by “consumer deception.”
    “Deception of consumers” would have been a better way to say it I guess.
    > Re: “8% seems like a lot. By what basis do you attach the qualifier “only”?”
    ETOs are definitely down from recent prior years. CAAMP didn’t have comparable data from prior years (because they changed their calc method) so I’m looking for some. But most lenders will confirm this trend.
    > Re: “But that’s not the real story about pre-payments. CAAMP reports that mortgages used to be paid off in 2/3 the original amortized time, now they expect current mortgagees to require 4/5 of the time.”
    You’re absolutely right and you burst my bubble. LOL. I was saving that point for the CAAMP Fall Stats story we’ll do this week. More to come…

  5. Hi Sampson,
    Maritz polls and/or weights to general population proportions on all key demographics, such as age, gender, region, etc.
    You’re totally right that age impacts the likelihood that someone will use a broker, research and originate mortgages online, go into a branch, choose a particular term and mortgage type, etc.
    Cheers…

  6. Sad to state, but many of the 35-40 year old friends I have still go to “their bank” for any product or services …
    Some things are not age-related :)

  7. But those are Gen X’ers no? Even if these individuals continue going to banks directly, I doubt it is out of loyalty, possibly some ignorance to the potential benefits of a broker.

  8. “This coming from the guy who says such hilariously objective things like “Brokers are good for everyone”.”
    I must be missing something because the humour escapes me. There is nothing untrue about that statement. Literally anyone who needs a mortgage can benefit from speaking to a good broker. A bank will always try to sell you its own bill of goods. Show me the downside to hearing alternatives to that.

  9. There will always be people who go to banks but as Rob said, the likelihood goes down with age. Half of first time buyers choose brokers. I think that says a lot.

  10. My first experience with a broker was horrible (I refinanced three months into my original term), so bad that I decided to negotiate myself when my mortgage came up for renewal five years later. Although it was a single individual, he really hurt my perception of the industry.
    With a recent relocation I decided to give the broker channel another shot, and I must say that the experience was certainly better. The knowledge I had from this site really helped me feel confident that they were working on my behalf, and getting me the best conditions to fit my needs.

  11. Many people do their own legwork either online or in person. Any absolutes like that statement (something is good for everyone) is almost always not correct.

  12. Disappointing as it is that brokers have not been able to increase their market share in 7 to 10 plus years, it is depressing to see numbers so low on client satisfaction of having used a broker. Increased marketing dollars to “sell” the services of the industry should be redirected by individual broker owners on providing better management, supervision and education of its agents….. a stagnant industry can only go in one direction without strong leadership from the brokers to change the customer experience

  13. I have both used brokers and dealt directly with lenders and, unfortunately, have not experienced a discernable difference in results.

    I continue to look for a broker with whom I can work, but it has proven to be more difficult than one would think (or, at least than I thought). Specifically, I am looking for a broker{age}:

    • whose focus and attention span go beyond the immediate transaction;
    • with experience and expertise in both residential and commercial financing;
    • has experience with JVs and works with private capital in addition to mortgage companies and banks; and
    • understands our objectives and is dedicated to being on-board for the long-term.

    A good broker should be advising us on strategy for financing and mortgage placement so we do not limit our future options – like loose the ability to place residential mortgages with a mortgage company as a result of already holding too many with banks.

    I understand that bread-and-butter for the vast majority of {residential} mortgage brokers is assisting Dick and Jane get the best mortgage for their home – which helps explain the difficulty we are experiencing. However, to meet our needs, a mortgage broker{age} needs to bring more to the table than simple shopping a given mortgage around for the best deal.

  14. The survey also indicated the public was slightly more dissatisfied with their last mortgage experience at a bank.
    Let’s face it: borrowing is not like going to a spa. Most people are unsatisfied with some aspect of the whole borrowing experience.

  15. Another great article – thanks Rob. We can do so much more as an industry to create awareness. Perhaps CAAMP could create a national ad campaign? At the end if the day, the more positive experiences our clients have, the more referrals we will get. I hope that more brokers will shift to developing relationships with their clients as opposed to govusing only on the transaction at hand.

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