Mortgage wars; it’s probably the best soap opera going.
It wasn’t long ago that we had the big banks undercutting each other to the point that former Finance Minister Jim Flaherty stepped inand told them to quit it. That was two years ago, and with rates now even lower, the drama has spread down to the smaller brokers jostling for space at the table.
In the latest installment, mortgage website RateHub.ca has kicked broker Spin Mortgage off of its platform, accusing the Vancouver operation of dangling a 2.44 per cent loan that was just bait to get customers to its own site.
What both sides agree is that RateHub indeed booted Spin Mortgage. The why is a point of dispute.
“We believe in financial transparency and not allowing teaser rates or bait-and-switch rates being posted that gets someone on the phone and then … transitioned into another products,” says Kerri-Lynn McAllister, chief marketing officer at RateHub.
She says the 2.44 five-year fixed mortgage – which is certainly low, but not the lowest broker rate out there – has restrictive conditions such as a 30-day close that makes it unachievable for 90 per cent of people who check it out. In other words, click bait.
This is a hassle for RateHub, which gets angry calls when people click through a rate on their site and find out they don’t qualify.
McAllister also takes issue with Spin putting the offer on RateHub sporadically, sometimes for just an hour or two a day, spurring more confused calls.
“Then our reputation is put at risk,” she says.
Spin Mortgage counters that the restrictions on the loans are a condition imposed by the lender, Industrial Alliance, and not unique in a market that has seen the traditional mortgage morph into a specialized product geared to get the interest rate as low as possible.
“My belief would be they don’t like how aggressive we were,” says Spin co-founder Steve Pipkey, noting that RateHub owns broker CanWise Financial, which is not set up to offer the Industrial Alliance Loan.
He maintains the 2.44 per cent mortgage is a legitimate product they want to sell, and says the practice of only posting the rate for a few hours at a time is due to economics.
Pipkey says Spin pays RateHub $50 every time someone clicks through and fills out an information form, becoming a “lead” for Spin to pursue. A backlog of traffic can mean it stops making sense to pay for more leads.
“You’re paying $50 a pop on the lead. The type of people that do those leads, if you’re not back to them in 5 minutes, forget about it. You just wasted your money,” he says.
He also disputes the idea that the vast majority of people can’t qualify for the loan, saying they have sold four or five in the past month.
If nothing else, the dispute offers a window into the sometimes confusing world of mortgage brokers, which take commissions from lenders to hawk their mortgages to the public for them, usually at prices better than you can get from the lenders themselves, which is a bit of a head-scratcher.
Indeed, Pipkey says the 2.44 per cent mortgage from Industrial Alliance actually pays a better commission than some higher-rate loans from other providers.
Under Finance Minister Joe Oliver, the government has been a bit more laissez faire on the mortgage issue, preferring to let the lenders police themselves.
So you’re probably not going to see one of the big six hawking mortgages at the 2.5 per cent level, but the loans are out there if you can jump through the hoops, just a click (and an information form) away.