Broker Channel Market Share – Q3

It seems that more power is being concentrated in the hands of fewer lenders. The mortgage broker channel’s top 10 lenders accounted for 85.6% of its volumes last quarter, according to data from D+H. That’s the highest level since we started tracking D+H market share reports in 2010.

Broker-Market-Share

It’s against that backdrop that we see a micro trend taking place with credit unions. While still a tiny slice of the market, CUs posted an 88.5% jump in broker volume over the last year.

Credit union growth is a trend with legs. For one thing, CUs have a regulatory edge versus federally governed banks. No one is sure how long that will last and there are exceptions by province, but it enables them to offer things like:

  • 80% loan-to-value HELOCs (most lenders are capped at 65%)
  • Lower qualification rates on uninsured mortgages
  • Cash-back down payment mortgages (not our favourite products).

Some CUs have major growth aspirations and an increasing amount of deposits to lend out. Many of them see brokers as a ready-made distribution channel. On top of that, CU growth in 2014 will likely be accelerated by mergers.

(On a side note: We’ve heard an unconfirmed report of a large merger in the works. If true, it would result in multiple entities forming the largest CU in Ontario.)

*******

Here are the current market share leaders in the broker space, as of Q3…

Rank  Lender Market Share*

12 Mo
Change

1 Scotiabank 18.7%

-450 bps

2 First National 16.3%

-100 bps

3 Street Capital 10.7%

+310 bps

4 TD Canada Trust 10.6%

+250 bps

5 MCAP 9.3% 0 bps
6 Home Trust 7.0%

+110 bps

7 National Bank 5.0%

+150 bps

8 RMG Mortgages 3.4%

+190 bps

9 Equitable Bank 2.4%

+20 bps

10 Laurentian/B2B 2.2%

-130 bps

Quick takes:

  • Mortgage banks added 2.3 percentage points of market share while banks dropped 0.9 percentage points
  • The most eye-catching change was in Scotia’s share, reportedly down 4.5 percentage points. We surveyed a few big brokers (admittedly not a representative sample) for their thoughts on why this happened. We got answers like:
    • Tighter underwriting rules
    • New restrictions on Scotia’s specialty mortgages (e.g. rental and new immigrant programs)
    • An unappealing variable rate
    • Slower turnaround times, possibly due to more deal scrutiny during the approval process and higher underwriter workloads.It should also be noted that a greater amount of Scotia’s volume has been routed via the MorWeb platform in the past year. Those numbers are apparently not reported by D+H, so it’s hard to say how that affects Scotia’s (and other lenders’) share of the market.
  • The top 7 lenders were the same as one year ago, with the only exception being Street Capital and MCAP swapping 3rd and 5th positions

* Broker Market Source: D+H puts out a terrific, non-public report called Lender Insights, which compiles lender market share data in the mortgage broker industry. We receive data from that report via third party sources and have quoted it here. The data above is not confirmed, but is believed reliable. Note: These market share figures do not count MorWeb volumes (D+H’s smaller competitor).


Rob McLister, CMT

  1. A merger creating a huge broker friendly CU in Ontario would be a very interesting development. A non-OFSI restricted lender in Ontario with a big enough balance sheet and freed of branch lending area restrictions because it would have enough branches would be a wonderful addition to the broker space and be great for consumers.

  2. Very interesting Rob.
    Are these market-share figures for closed transactions or submitted transactions?
    What are your thoughts on asking Marlborough Stirling for the company’s similar statistics and aggregating both companies’ statistics?

  3. Credit unions have become an important arsenal for my business because I mostly work with self-employed people. They qualify VIRM based on the contract rate and not the Bank of Canada’s qualifying rate which makes it easier to sell cash flow. They are also far more out of the box on stated income compared to the banks who have become absurdly difficult in that area. Just make sure the property is located close to one ;)

  4. Hi Lou, The stats reflect funded volumes (closed transactions).
    Unfortunately, we don’t have access to dollar volumes by lender, so it would be hard to add D+H and MS together to create truly accurate market share figures. That said, at last count D+H had 90%+ market share, so the figures here are a reasonable industry-wide proxy for most lenders.

  5. An interesting update on Scotia’s broker market share:
    According to Jim Smith, Vice President, SMA, “About half” of the decrease in share (as reported by D+H) was due to a “shift in business” to D+H’s competitor, MorWeb.
    That’s much more than most people thought, and a small feather in MorWeb’s cap.

  6. I can’t believe Scotia and TD are that high. I. Just. Can’t. Believe it. What is wrong with you people? The worst lender to send deals to are the ones you will never ever see your clients again from. Brokers have no foresight, refuse to turn their book of business into a sellable model, and continue to feed the same old horses on the block. First National is on that list too due to their extremely strong retention teams.
    Crazy.
    But, I digress.

  7. Having worked in the CU system for 15 years, I can say that a Credit Union merger would be long in coming due to the ego’s that are involved – no CU CEO wants to be displaced. And their regulator, DICO, has nowhere near the OSFI experience in looking after CU’s. Decent idea that it is, it will be a long time coming unless forced to do so by regulators. See also Saskatchewan and Alberta CU history about this merger topic.

  8. Old Tyme, you don’t have to convince me that CEOs want to keep their C-Suites, I agree completely. I think this may be a case of those CEOs seeing the handwriting on the wall. In a world where the Big 5 have dominance over the investor capital side of the equation not just the retail banking side: CU CEOs may come to see merger as a question of survival. Better to have a guaranteed pension than find yourself out of a job.

  9. Isn’t it clear why banks are on top? They have the most products. Monolines can’t do balance sheet lending.
    We should ask ourselves just one question when recommending a lender – is it the ideal choice for the broker or for our client? If you do right by your clients, your clients will do right by you.

  10. At the end of the day it is all about who can get deals done. If you are a broker who works with mostly triple “A” book of business, easily verifiable income, the kind of applicants who can get approved anywhere, *some* monoline lenders may be better on pricing than the banks. At the end of the day, every lender prefers internal origination and retention instead of paying a third party to originate the business. So I don’t see the banks’ high renewal rate as a deterrent. It just means you have to keep top of mind with your customers throughout the entire term. Is everyone going to end up renewing with you? No, but set yourself a target, track your progress, and tweak your post funding retention plan. I can tell you for a fact that the reason why banks have a high renewal rate is not because they do anything special. It’s because of customer complacency. But the broker’s actions also play a major role here, including free refinance options. Are your clients aware of those? If you are a client of the major banks, be it a mortgage client or just have a simple bank account, ask yourself this question: when was the last time your personal banker or mortgage specialist reached out to you? I’ll bet that 9 out of 10 people will say I can’t remember when that happened. See? Nothing special.

  11. I am a bit troubled, and perplexed, about the point you make about Scotia’s market share may not be a true picture due to their using an alternative platform for broker-originated mortgages vis a vis MorWeb versus D+H Ltd. Having to rely on these two private networks for this sort of basic data is not acceptable for a transparent marketplace.
    An alternative, I propose, is to require the Canadian Association of Accredited Mortgage Professionals, the de-facto mortgage broker association, to source and publish reliable broker-originated mortgage data (perhaps from the member mortgage broker firms themselves?) on a semi-annual basis at a minimum (quarterly would be ideal, however). I think that would go a long way at increasing transparency in the industry.

  12. If 9 out of 10 clients renew with a bank and 7 out of 10 renew with a monoline, what difference does it make? You should submit to the lender that best fits your client. Period.

Your email address will not be published. Required fields are marked *

Copy link