Both nesto and M3 Group say the timing was just right for their recently announced partnership, which is poised to shake up Canada’s mortgage broker industry.

The deal, which brings together two heavyweights in the digital lender and broker network spaces, opens a new suite of mortgage products to M3’s network of 8,500 brokers.

The partnership includes an agreement to maintain identical rates between products offered direct-to-consumer and those offered through the broker channel.

“One concern that many mortgage brokers may have is, ‘why would I work with a company like nesto, who is going to undercut me on their direct-to-consumer line?’” says the online lender’s co-founder and head broker Chase Belair. “That won’t be possible; the broker will have access to the same rates we offer our consumers directly, so it really is just a complimentary channel to increase our mortgage book.”

The next step in nesto’s evolution

Nesto was founded in 2018 as a digital broker that leaned on third-party products, and despite building an award-winning customer-facing mortgage application, the company had little control over its clients’ borrowing experience.

“We became a lender so we could control the underwriting and approval experience, then we became a servicer so we could control the experience post-funding,” Belair says. “Then we launched our cloud services for major financial institutions — including Investors Group and Canada Life — and now to scale further we’re working with M3 to begin accepting mortgage applications through the broker channel.”

The right partner at the right time

Tapping into the broker channel allows the mortgage provider to reach the 45% of Canadian first-time homebuyers who choose to work with a broker. Belair adds that the move had been in the works for a long time, but ultimately came to fruition once the digital lender was established enough in its direct-to-consumer offering to pivot its focus towards the broker channel.

“When we commit to do something, we go all-in, which is why it took us this long to pull the trigger and sign a partnership with M3, but this will be our focus for 2024,” he says. “It doesn’t take away focus from our existing partnerships, which have been of the highest priority over the past 18 months, but it will be one more channel that we’re going to allocate our resources and attention to to ensure we can meet our growth objectives.”

M3 Financial Group echoes that sentiment, suggesting the timing was just right on both sides of the negotiating table.

The company’s vice president of lender relations and lending solutions, Eric Chamelot, acknowledges that it’s tough to enter the lender ecosystem without the resources of a major bank, suggesting that nesto needed some time to properly position itself in the market before a deal could be made.  

“For us it was important that nesto was willing to focus on the work that they’re going to be doing with us, and not be spread too thin,” he says. “In the last few months, it became clear that they were ready to service the broker community, and that for us was a sign that it’s the right time, they’re going to do a great job, and that motivated us to get to an agreement.”

A partnership with wide-reaching implications

Chamelot believes that the mortgage originator’s network of 8,500 brokers will appreciate nesto’s hands-on approach and innovative online platform.

He notes that the deal does not affect M3’s current agreement with National Bank, which makes the financial institution’s products available to brokers in Quebec and Ontario.  

“That partnership is going very well,” Chamelot says. “This is our fifth year with National Bank and the volumes have steadily increased — they have a significant share of our portfolio — so we’re really happy about that, but we have nothing to announce today as far as National Bank.”

Chamelot adds that he sees the partnership with nesto as an opportunity to expand the M3 broker network by giving members more tools to work with. 

“It’s much easier to be a mortgage broker than it is to be a mortgage specialist with a top bank, simply because you have more supply — more bullets in your gun — if you need to find solutions for your clients,” he says. “The more leverage we add to that suite, the easier it gets for the brokers, and we hope that in itself will attract more brokers to the industry.”

Chase Belair deals M3 M3 Mortgage Group nesto

Last modified: February 1, 2024