RateHub to Launch a Mortgage Brokerage

RateHub-LogoMortgage leads are profitable but mortgages themselves are much more so. It’s not a complete shock then that RateHub.ca, a lead-generation company, is starting its own brokerage.

RateHub, a leading mortgage rate comparison site, hasn’t publicly named the new brokerage yet, but says it will launch later this year. It will be managed by former True North Mortgage principal James Laird. Site founder Alyssa Richard will remain the CEO.

The new brokerage will be virtual (i.e., no storefronts) and headquartered in Toronto. Richard says it will buy leads from RateHub on the same terms and price as the site’s 45 other brokers. The company was careful to stress that the new brokerage will have no preferential treatment in acquiring leads from the site.

“The best thing for the consumer is to have a site with lots of choice and lots of providers,” Richard says. “There are plenty of leads to go around. We couldn’t even come close to fulfilling all the leads ourselves.”

alyssa-richard-ratehub“Some of our brokers can’t even [advertise] the lowest 5-year fixed rate for a full day because they get too much volume,” she adds.

RateHub says the brokerage announcement was “well-received” by most existing broker clients when it told them earlier this week. The company, which competes with RateSpy.com and RateSupermarket.ca, says it wants to be as transparent as possible. But not everyone is on board.

“We are disappointed to see James join RateHub to build their lead fulfillment arm,” said Dan Eisner, CEO of True North Mortgage and reportedly the site’s biggest advertiser. “This arm will be in direct competition to us and other mortgage brokerages that advertise on the site.”

He added that the non-arm’s length relationship could “confuse clients and eventually lead to the demise of the site as brokers and clients leave.” Furthermore he also questions that the new brokerage will pay for leads in the same way as other brokers, noting, “It would amount to no more than taking money out of their left pocket and putting it into their right pocket.”

Interestingly, Laird announced that he was leaving his chief operating officer role at True North just 19 days ago. In addition, he already owns a stake in RateHub.ca and retains a minority ownership in True North.

One decision that’s surprising is that the two organizations will not be separate corporations. RateHub’s brokerage will clearly affiliate itself with RateHub’s rate comparison site. That will undoubtedly concern some competitors, to the extent that it gives RateHub a brand advantage. Little edges are especially important when multiple brokers are advertising similar rates, which happens frequently.

“I wish James and Alyssa all the best at this new venture,” said Ron Butler of Butler Mortgage, one of the industry’s largest lead purchasers. “[They] have always put the consumer first and I have every reason to believe they will continue to do so. But…I worry that if I am the consumer and I see zero or very little difference between two rates, won’t my instinct be to press the button that is the same logo as the website?”

HomepageBut we suspect there’s more to the naming decision than meets the eye. According to Laird, when he made his investment in RateHub he ensured that his participation in “A-side” mortgage origination with RateHub Inc. was exempt from his non-compete clause with True North Mortgage. So it sounds like (and we don’t know this for sure) choosing another name for the brokerage may not be an option.

To those who wonder whether the new brokerage will squeeze out competitors by posting the lowest rates throughout the site, Richard says flatly, “Winning all rate categories would alienate our current broker customers. That won’t happen.”

In this author’s view, anyone who operates a rate comparison site has no chance (long term) if his or her site isn’t fair and objective. Brokers and others will see right through you otherwise. For that reason we’d be surprised if RateHub jeopardized its cash cow lead-generation business by exploiting its advantaged position and disenfranchising its lead buyers. (Full disclosure: This author also owns a mortgage rate comparison site, as well as a mortgage broker that advertises on that site and RateHub.ca.)

How RateHub Works

RateHub.ca gets hundreds of thousands of page views per month. That generates 4,000+ leads (i.e., web leads, phone calls and web clicks) per month, 71% of which are for 5-year fixed mortgages.

Its rate tables show the lowest rate on top and consumers pick which mortgage provider they wish to contact. The most popular and competitive rate categories are, not surprisingly, the 5-year fixed and 5-year variable.

The majority of leads go to the provider with the lowest rate. When there’s a tie, the providers are randomly rotated. Richard says that second-place rates also get a sizable minority of leads, especially when the provider has a great brand, like banks and major online brokerages.

The company also purchased a credit card comparison website in November and will roll out comparisons of credit cards, GICs and savings products later this year, putting it in more direct competition with RateSupermarket.ca, the granddaddy of Canada’s financial products comparison space.

Rob McLister, CMT (email)

  1. This will drive business to other comparison websites and what you’ll get are brokerages competing for leads over a mere basis point. Good luck to all the participating brokers, you just got kicked in the ba**s with that announcement and this includes the author of this story. No matter how you spin it, when the website you are relying on for leads is competing with you for the same customers, that is a direct conflict of interest. Eisner’s analogy is correct. You also need to ask yourself what’s stopping the competing websites from choosing the same path.

  2. wow, I would be seriously worried if I was one of the brokers signed up with Ratehub. They may not be taking all the leads now but if their new brokerage is profitable, more so than selling leads, this will wet the appetite of the new brokerage and they will consume more leads, drive down other brokers rates and not to mention that the new brokerage wont have to pay for the leads like everyone else. Talk about a competitive advantage. Im glad im not a broker that needs this site to put food on my table. very smart of Ratehub though, unless it backfires and pisses off the 45 brokers. will keep a close eye on this

  3. Not only is this a threat and an offense to the brokers that choose to advertise on Ratehub going forward, which I suspect will be fewer, but it’s a real kick in the teeth to the brokers who have been paying them over the past few years.

    Not only do you now have a formidable competitor, but you paid to build it.


  4. About a year ago in a CMP article on this rise of rate discounting websites I made the following comment:

    “If we keep building these sites up, what’s to stop them from becoming our competitors?” says Dave Larock, a broker with The Mortgage Group. “They gain strength every time we turn one of their referrals into a funded deal. Right now they (rate sites) depend on brokers for momentum – but the day will come when they will begin dictating pricing to us; or just realize they don’t need us anymore.”

    That didn’t take long …

    1. Hi Dave,

      Thanks for the comment. Here’s another way to look at it: If brokers didn’t buy leads from rate comparison sites, that would slow their growth but not stop it. The demand for easy online price comparisons is simply too great, despite what many in the industry feel is best for mortgage consumers (and themselves).

      Lenders are increasingly supporting rate sites directly. Just look at who’s banner advertising on RateHub: TD, CIBC, Scotiabank,… I’ve reached the conclusion that, in time, the majority of lead sales will be to lenders, not brokers.

      The net result is, and will be, exactly as you and others expect, industry-wide spread reductions, commission compression and (to a significant degree) disintermediation.

      For originators concerned by this trend, every ounce of energy and resources should go towards educating consumers on the value of experience, one-on-one service and sound advice. No effort should be expended trying to thwart rates sites as that will prove utterly futile.

      1. Mortgages aren’t that complicated. It isn’t that hard to educate yourself, and quite frankly an agent being paid 1% of the amount is excessive compensation for what they do. No wonder so many of them are willing to buy down their own rates. No wonder so many consumers (especially the second time around) would like to do it themselves as much as possible. Disintermediation in mortgages is a good thing. Technology is your foe, which puts you on the wrong side of history. Keep serving old folks and people who can’t manage their own money. This is the future for everyone else.

        1. @rhr

          When it becomes a mater of buying down a rate using commission, it will morph into another question: Does the client profile really deserve such a motgage rate ?

          Profile lending is coming in very fast way, and the borrower paying more due to unfiled taxes or their low beacon scores is already factored into the mortgage rate market. We call it the “B” market or equity market.

          However, borrowers that fit the A-, A, and A+, A++,or een AAA+++ are just all being treaed the same—UNTIL the very near future.

          I’ll boldly predict that the mortgage rates will start to be more profiled by A rate lenders in the near future. I think it’s long overdue. We are starting to see it already where certin lenders have maximum buydown rate and it’s a really good idea for securiztized lenders.

          Do all borrowers deserve the best rates due mostly to their negotiation skills or whether they find the right rate site ? Perhaps, you may think so, but securitizing lenders have a need for structure. The lenders and stakeholders like mortgage brokerages can’t just keep killing each other, so they will build in more interest rate profiles, just like insurers do with insurance premiums.

  5. Dan Eisner should stop whining and fear mongering. Ratehub Inc has enough leads for everyone. It’s completely fair that Ratehub try fulfil these leads. How else can they learn the true value of their leads. Good luck guys.

    1. Such a gross misconception. The function and model of an aggregator is to maintain a fine line between providing somewhat impartial consumer advice and serving advertisers (lead purchasers). A sudden flip flop to utilize both those relationships for an alternate purpose (servicing), is a fundamental breach of the relationships.

      This move clearly shows the inexperience of the operators and instantly wipes the bulk of any credibility and impartiality off the board. The icing on this tasteless cake is the obvious intent on Laird’s part, to blatantly circumvent a standard Non-competition clause. It’s clearly a weasel move and they’re shouldn’t be any room for it in an industry that demands a higher standard of ethics. Eisner is quite justified and should pursue for damages.

      (CMT Note: These comments represent the opinion of this poster and not CMT. This information has not been validated and may not be factual.)

  6. Lets see. A $1,000,000 mortgage request comes in. Do you actually think ratehub will pass it on to another broker rather than keeping it for themselves? Why not pass on the crappy leads? I used to use these guys and I can tell you most of the leads we’re from 519 or 613 area codes. Very few from 416.
    In my opinion – complete scam.
    Run for the hills

  7. Although it may be a conflict of interest, it does come down RateHub seeing the opportunity to get into the mortgage providers game vs a simple lead generator. As with all businesses, when opportunity presents itself, it makes sense to pursue it. Advertisers simply need to watch the quality of leads they receive and to determine if advertising on the site remains beneficial.

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