The dicotomy of between O’Leary Mortgages and mortgage brokers?

There has been much uproar in the Canadian mortgage community about Kevin O’Leary and the creation of O’Leary Mortgages.  Many mortgage brokers are upset that his mortgage product bypasses mortgage brokers and "trivializes" our role. Personally, I welcome O’Leary Mortgages into the mortgage mix. Hopefully his mortgage product can make its way into Quebec. Kevin's profile will bring more attention to the mortgage industry.

I love my job as a mortgage broker but for the average person mortgages and debt is still a mystery. Here is where a mortgage broker should be instrumental. Our role is to find the right mortgage for our clients' needs but also guide our clients to pay down their mortgage, help our clients' manage their debt, how to fix/maintain one's credit, among other things within the box of our mortgage license.

Whether you love him or not, Kevin O’Leary is successful and appears to be an advocate for the broker model. Kevin is correct in the broker model is not the sole model of delivering mortgages to the consumer. Let's face it if a client wants an ING mortgage they can apply directly online to ING. I think that Kevin is challenging our profession to do better. As a profession we must provide value of our client today, on an ongoing basis and in the future. "#Being awesome," Scott Stratten shares in his book The Book of Awesomeness is critical.

Scott Stratten's presentation about Awesomeness at the Mortgage Forum 2012 in Vacouver

Scott is an advocate for quality of product but more importantly that we are in an age demanding excellent customer service. As broker we must provide exceptional customer service and value as this is what will keep customer's returning to you rather than just rate. Clients get it and need that advice! But it's up to us to keep stepping up and evolving with the times whether it delivering on service, banking developments or technology. Hence why I say I support O’Leary Mortgages. As mortgage brokers we need to continue evolving and provide value to customers. O’Leary Mortgages will also bring more attention to the mortgage brokerage channel. After all, approximately 44% of overall Canadians actually use our services.

What’s going on with my variable mortgage?

Quite a few important changes have been taking place in themortgage industry. This week, I will focus on closed variable rate mortgages.If you presently, have a variable rate mortgage, you’re looking to refinance ormaybe even buy then you should know that the variable discounts have beenshrinking. A variable rate mortgage is based on the Bank of Canada lending ratewhich currently rests at 1%. The Bank of Canada is responsible for printingmoney and managing interest rates. Great job, I know! The Bank of Canada meetsevery three months to discuss amongst other things whether to increase,maintain or decrease that 1% lending rate. Each bank turns around and adds 2%to the 1% giving 3% to which they can loan to the public. Depending on the typeof loan you require such as variable rate mortgage, a personal line of credit,secured line of credit and even some bank car loans are all based on thevariable. 

Each of these variable-based loans can have a discount or anaddition added to the 3%. In other words, if you need a car loan through yourbank then they could charge you 3% plus 3% giving 6% and that addition of 3% iswhat follows you for the life of your loan or term. Currently, the closedvariable mortgages rest at 3% minus a discount. This year we have seendiscounts on average at minus 0.75%. Here is what I mean by the discounts areshrinking whereas the Bank of Canada lending rate of 1% has remained stableover the last few quarters.  Whataccounts for this change, good question? Some reports suggest that the last jobfigures in the US have bumped up the cost of borrowing but my gut tells me thatmany Banks have lost by giving deep variable discounts and now they are tryingto recover.

Based on all this is variable still the way to go? That’salways a personal choice. I would say that many clients are still requestingthe variable but my advice is simple. You know yourself best. If you keep yourfinances organized and relatively in-tune with the economic buzz then thevariable might be for you.

If you have any specific questions you’d like to discuss innext week’s article please feel free to email me.