Virtually every professional mortgage broker in Canada saw this coming.

Once the Department of Finance eliminated popular default insurance products last fall and OSFI jacked up the cost of remaining insurance, there could be only one outcome: a conspicuous erosion of mortgage competition.

Policy-makers essentially admitted that they willfully damaged mortgage finance companies (MFCs) that depend on insurance for funding. But MFCs’ losses are the banks’ gain, especially Scotiabank.

Scotia, the most indispensable lender in our channel, lengthened its dominant lead in Q2 with a stunning 1,030-basis-point surge in market share. It closed more than one in four broker mortgages from April through June.

Now make no mistake, we’re lucky to have strong broker-friendly banks in our channel like TD and Scotia. And we can’t pin misguided macroprudential policy on them. Nonetheless, the growing dominance of the Big 6 risks costing consumers billions in extra interest.

Without fairly priced default insurance on refinances, extended amortizations, $1-million+ homes and rental properties, most bank challengers simply cannot rival the cost-advantage of big bank balance sheets (the reason the government got into the securitization business in the first place).

Here’s a look at how things shook out for the rest of the pack last quarter…

Rank  Broker Channel Lender Market Share
Q2 2017*
12 Mo Share
Change
1 Scotiabank 26.7% +1030 bps
2 MCAP / RMG 14.2% -120 bps
3 First National 12.7% -250 bps
4 TD Canada Trust 8.6% +190 bps
5 Street Capital 6.3% -210 bps
6 Equitable Bank 4.5% -10 bps
7 Merix Financial 4.5% -240 bps
8 B2B Bank 3.7% +140 bps
9 Home Trust 3.6% -310 bps
10 Canadian Western Bank 1.3% +40 bps

Quick takes:

  • The winners: balance sheet lenders. The losers: almost everyone else.
  • Scotiabank’s 1,030-basis-point 12-month share gain is easily the biggest we’ve ever seen since CMT began tracking this data in 2010.
  • Overall, banks seized 11%-points more share in Q2 (bringing them to 42% of the broker market) while monolines lost 8.8%-points, leaving them at 38%.
  • The likes of First National, Merix and Street all took it on the chin. For MCAP to only be down 120 bps was an accomplishment.
  • Home Trust nose-dived from #3 in Q1 to #9 in just three months. No explanation is necessary, but in the event you haven’t had TV or Internet since March, here’s one.
  • Canadian Western Bank posted its highest share on record as it mopped up business that Home Trust couldn’t service.
  • Manulife Bank made its debut on the top-20 list, coming in at #11. A year ago, it owned just a tenth of one percent of the market. It and CWB will jockey for the #10 slot in the next few quarters.
  • Among the provinces, Ontario once again posted the largest year-over-year gain in submission volume, up 3.7%. Alberta (again) posted the biggest drop, down 1.6%, followed closely by B.C., which saw broker volumes dip 1.3%.

Data Source: Finastra puts out an excellent 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 Newton volumes (D+H’s small but growing competitor) and leave out a few lenders that Finastra doesn’t report by name, like CMLS Financial.