It’s no secret that in the mortgage broker industry, we love to share insights and compare notes—whether it’s asking who’s financing what deal in Facebook groups or discussing the latest market hurdles.
And lately, we’ve had no shortage of challenges to navigate.
Increased rates, a stupidly high stress test, overbidding, valuation drops, client stress, AML (anti-money laundering) requirements, product suitability forms, shorter terms with lower compensation and now this current rate competition environment, to name a few.
It’s easy to look back at the past few years and focus on the challenges that have made our work more difficult. However, as these hurdles grow for us, they also become more pronounced for our clients. This only increases the demand for our expertise and advice, making our guidance more essential than ever.
Challenges = Opportunities
If you spend your time looking at challenges, all you’ll see are obstacles.
But if you take a moment to look for opportunities…well, then boy are there plenty of opportunities right now.
Renewal market
As you’ve likely heard, the “Gold Rush” is officially here, with over $900 billion in mortgage renewals approaching over the next few years. This includes $186 billion set to renew in 2024, followed by $315 billion in 2025 and another $400 billion in 2026.
These upcoming renewals are set to involve some tough conversations. Clients transitioning from interest rates as low as 1.5% to the current levels around 4.5% will face payment shocks and affordability challenges. This means that borrowers will be more motivated than ever to shop around for the best rate, with the days of mortgage holders signing their renewal papers without exploring other options largely behind us.
With this wave of clients seeking options, your phone is likely to ring more often—especially if you’re targeting renewal business in your marketing.
While it’s true that your conversion rates may dip, as many clients will be shopping around based solely on rate, increased calls mean more opportunities. Even in cases where you can’t place the mortgage, every conversation is a chance to create a satisfied client who may refer others.
It will be paramount for your job satisfaction not to dwell on the files you can’t win in these next few years. The more the phone rings, the better. We may not win every file, but we will be winning some. And you better be tracking those ones you don’t win— because three to five years from now, you just might get them on the next renewal.
These conversations are going to be tough, and you are going to need to be in the right mindset going into this to handle the increased pressure from clients worried about affordability. But, if you can position yourself as a trusted source of advice who alleviates stress for the client, you will win that business.
You hear it all the time in our biz: rate isn’t the only thing. And in these coming years, empathy and creating trust through listening to what the client really needs is going to go a long way.
Rate shopping
No, this isn’t a dirty word. We’ve been telling clients to shop around for the best rates for years, and now they’re finally listening.
So, why do we get frustrated when they shop around with us? The truth is, we want clients to shop around, but perhaps not when it directly impacts our business.
As industry veteran Dustan Woodhouse often says, “ask better questions” to uncover the true needs of your clients. Many clients mistakenly assume that a lower rate automatically means lower payments or overall costs, simply because they aren’t aware of the other options available to them. Often, all they know is the rate, which becomes their sole focus.
I recently had a client call me, asking for the lowest rate. Instead of just providing a number, I asked, “Why do you need the lowest rate?” She explained that her goal was to achieve the lowest possible payment. I then asked her, “Would you care what the rate was if your payment was lower?”
This opened up a deeper conversation about her financial situation, and I was able to refinance her loan, consolidate her debts, and ultimately save her $1,500 a month. In the end, the interest rate wasn’t her main concern—it was about solving her overall payment issue.
Alternative lending market
In today’s environment of rising rates, tougher stress tests, and high home prices, more clients are turning to the alternative and private lending markets to achieve their homeownership goals. This shift presents a growing opportunity for brokers, especially since traditional banks do not operate in these spaces.
The key question is: How are you diversifying your business to capture this market? This growing segment presents a unique opportunity to increase business while helping clients who need more flexible mortgage solutions.
Variable rates and other terms
Did you know we are remarkably competitive on other products right now?
Sure, the three-year fixed is all anyone wants, but I will put it out there that this is a self-fulfilling prophecy. It could be argued that brokers played a role in creating this “three-year fixed problem.”
We evaluated the rates, looked at the risk of the interest rate differential (IRD) penalties in a dropping rate environment, and advised our clients to lock in for three years.
The three-year fixed term became the preferred choice primarily due to a few key lenders offering rates close to those of the five-year fixed, making it an easy alternative to sell compared to a variable rate.
We didn’t sell the three-year because we had a crystal ball foretelling that rates would magically be lower by the end of the term. Instead, we determined that two-year rates were higher than variable rates, making them less attractive, and if clients were going to consider a four-year, it made just as much sense to go with a five-year for a similar rate. So, the three-year fixed became the natural middle ground—a compromise between flexibility and rate security.
And once we started shopping that product around, word got out. Now, clients who had never previously given much thought to their mortgage are coming to us asking for a three-year—because that’s what their neighbour, coworker, or friend just signed up for. It’s become the default choice, simply by word of mouth.
We’ve been pushing the three-year fixed term for the past year, but at what point do we reconsider? If we believe 2026 is the year rates will really drop, it might be time to rethink promoting the three-year term. Throughout 2023, we won on every three-year term product because we had solid options and the competition was limited.
What happens when there’s demand for a product? The competition inevitably adapts—and that’s exactly what we’re seeing now.
When the competition pivots, we must pivot.
So, what are we selling now?
Should we be bringing back the VRM? Rate expert Rob McLister’s recent blog posts suggest perhaps we should.
In my market, many clients are locking into 5-year fixed rates again, as the current rates aren’t much higher than those from 2018/2019. Variable-rate mortgages (VRMs) are also gaining appeal, as clients can watch rates drop and switch to a fixed rate anytime without penalty.
Is the three-year fixed really the best option? Are we just following the crowd, or are we thinking critically about what’s best for each client? It might be time to consider if another product—perhaps one we’re highly competitive on—could be a better fit.
2026 and beyond
The “gold rush” we’re focused on highlights the wave of renewals through 2026. But let’s not forget, all the three-year terms being placed right now are coming up to renewal in 2027. By then, it will be a different kind of conversation as the market and client expectations will have shifted again.
No longer will clients be renewing from lower rates into higher ones. By 2027, they will likely experience payment relief, which could bring renewed optimism to the market. Conversations will be less stressful, and clients who have been cautious may feel more comfortable making financial moves.
It’s easy to get caught up in the short-term—focusing on what our business looks like year to year, or even week to week. I think often we forget to look ahead and set ourselves up for future business as well. We have been carefully crafting a nice pipeline since 2020 without even noticing. We are building for longevity just as much as we are working for today.
What does your CRM look like?
Decreased competition
When times get tough, people quit—that’s just a fact. And seasons like this (yes, this is just a season) will weed out those who dabble in brokering. Folks will slide into other roles and many will exit the space entirely. And for those of you who stick it out in the lean years, you will be picking up their referral partners and their existing clients. Yes, we may be facing a change in competition, but we will also be seeing less competition across the channel itself.
Remember: competition thrives at the bottom of the ladder of success, but collaboration is what happens at the top.
Could I go on? Absolutely. But instead, I’ll leave you with this: take a moment to reflect on the challenges you’re facing in your business right now. Within those challenges lie opportunities—ones that might reshape your future.
Everything is cyclical, and like all seasons, this too shall pass.
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Last modified: September 11, 2024
