We are experiencing an economic situation that no one alive has ever seen before.
Most middle-class Canadians like us are comfortable unless they have been directly affected by the pandemic. We have savings, homes, vehicles, groceries, and almost all still have regular sources of income. Working from home or in quieter work environments has created a sense of cocooning, but there is an economic storm taking place out there.
In spite of all of the bad financial news, financial institutions are not in trouble. They are doing well and have been backstopped by the Federal Government in important ways. The low interest rate environment is generating a lot of activity for them. It appears that people are locking in mortgages for longer terms and attempting to move unsecured debt to secured debt products.
Our experience with the major financial institutions is that they are quietly tightening up on lending programs. Our impression is that it is tougher and slower to get mortgage and business loan applications approved, unless these are supported by the new government programs.
With Covid-19, lending conditions have been changing every day and sometimes multiple times per day.
When in need of a mortgage or business financing, many people still go down to the bank branch on the corner or approach whatever institution they do their business or online banking. This may be the right decision for you or your client, but are you sure?
Canadians tend to assume that one financial institution is the same as the next and that things don’t change much from one year to the next. For many people, the only thing that changes are interest rates and so the only thing they ask us about are interest rates.
Right now, there is so much more going on including opportunities to save a lot of money by choosing the right vehicle for your financing. What that vehicle will be is in motion. You may already had stable financing but it could be improved. With the current environment, we are continually in conversation with lenders and with each other about what might work best for our clients.
We are constantly asking, what are things like with ABC Bank right now? What is going on over there! Who is there right now? What is their underwriting capacity? What do they like to see these days? Have management and policies changed recently? We talk to lenders and about lenders regularly and are continually trying to learn how the internal conditions of various lenders will affect our clients.
The popular assumptions about the sameness of Canadian financial institutions are not true. Financial institutions come in a variety of flavours! The products and services that each one offers may change. Are you comparing apples to apples or apples to oranges? What is the difference between a product that compounds monthly as opposed to a product that compounds semi-annually. How will a collateral mortgage affect your client? What length of time is appropriate for a particular situation? What is likely to happen at renewal time or if you need to break the term of your mortgage?
There are times in the year, phases in the business cycle in which interest rates and terms are more favourable, depending on the institution. Many of the changes are unpublished and marketing materials tend to lag behind the current offerings. There may be products and services in posted materials that are impossible or almost possible to obtain. No one tells the consumer or business customer coming in off the street.
What an experienced and skilled mortgage broker does is survey the wide range of lenders and lending options available. We establish and maintain relationships with an array of lenders. Our reputation is very important to us because lenders can put an unskilled broker at the bottom of a pile or even ban them from using their mortgage products. Some brokers just refer everything to the same few lenders because they get sales volume bonuses and possibly because they only have a few approved lenders.
Working with a good mortgage broker will help to ensure you understand your options. We can help determine the best program and mortgage choice for you, even if that means staying right where you are.