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Why are mortgage brokers relatively under used in Canada?

28 March 2013

The mortgage market in Canada predominantly features the monopolistically competitive “Big Five” banks.These banks originate more than half of all mortgage credit in Canada and are the first choice of a majority of Canadian customers.

A mortgage broker is an agent that represents the interests of the consumer when securing a loan from a bank or credit institution. Mortgage brokers also maintain strong ties with the lending institutions which allows for greater negotiating power. Rate discounts can be negotiated on the basis of number of borrowers the broker brings to the bank, the quality of borrowers, and amount being borrowed. Naturally, the more customers that the broker matches to a certain bank, the increased likelihood that they will offer a quantity discount to the broker.The rise of broker associations had a noticeable effect on how the Canadian banks use interest rates to entice customers.If consumers can receive low rates from brokers without the burden of extensive negotiations, they stand to save substantial amount of both money and time. It is therefore supprising that most consumers in the 90s and 2000s did not use mortgage brokers although the benefits of using one can be significant.

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Walter Pawlowski Ontario Mortgage Agent M11002486