haggle over mortgages means loss
Post - Monday November 25, 2002
By Garry Marr
continue to renew home loans at posted rates, costing them
thousands of dollars, according to a new survey from the mortgage
to be released today, found that 84% of consumers are staying with
their current financial institution when getting or renewing
mortgages, a move that is likely costing them at least one
percentage point of interest as they miss out on the financial
benefit of haggling over rates.
Now 1% might
not sound like much, but it could translate into more than $13,000
in interest per $100,000 borrowed over a 25-year amortization
message the mortgage brokerage industry is trying to drive home to
president of the Canadian Institute of Mortgage Brokers and
Lenders, which opens its conference today in Toronto, says the
industry is making inroads. While the 84% cited in CIMBL's fourth
annual survey may sound high, it was 90% last year.
drop of 6% is a big deal in the lending industry," said Mr.
are shopping around, he said, noting 11% of consumers renewing
their mortgage go to a broker, which is up from 5% in 1999.
consumers start out with good intentions, he said. The survey,
which is sponsored by Canada Mortgage and Housing Corp., found
only 36% of consumers intended to renew on their current lender
offer but 63% actually did.
people are going to brokers than they ever did before for their
renewal. More people intend to shop around but the reality still
is that the vast majority of people renew at the current
offer," said Mr. Straky.
big deal? Mr. Straky says a large percentage of financial
institutions will simply send out a renewal form at the posted
rate or close to it.
posted rate on a five-year closed mortgage is 6.7% as of Nov. 23
at most financial institutions. Mortgage Intelligence, a discount
broker, was offering that same term for as little as 5.38% on the
survey is to be released at the conference but a few other
snapshots of the results were provided to the Financial Post.
show that 57% of homeowners overall shopped around and received
different proposals from different lenders before deciding on a
mortgage, up from 46% a year ago.
particularly striking amongst first-time buyers," said Karen
Kinsley, CMHC's vice-president of insurance and securitization.
She said 57% of first-time buyers shopped around this year
compared with 39% last year.
of heading to the branch and sitting down with a bank manager is
also on the wane. The survey found 14% of borrowers arranged a
mortgage during a meeting in their home and another 14% said they
made most of their mortgage arrangements over the phone.
are not going to mortgage brokers, it's not because they are not
familiar with them because 75% of the respondents said they
understood how the industry worked.
president of Mortgage Intelligence, maintains that by not using
brokers consumers might be costing themselves up to 1.25% because
the spread between the posted rate and what is being offered on a
discounted basis is growing.
pretty substantial amount of money either way," said Mr. Ord.
"I think people remain uninformed and that's why they are not
shopping around. They haven't had enough exposure."
Mr. Ord said
the most interesting figure is the percentage of people renewing
with their same institution is shrinking. "Those people are
But the fact
that 63% are simply renewing at the offered rate "shows we
have some work to do," Mr. Ord said.
was based on a national sample of 854 mortgage consumers comprised
of first-time buyers, repeat buyers and those renewing a mortgage.
It is considered accurate to within 3.4%, 19 times out of 20.