Rate shopping sites…tested again.. and failed again.

A few years ago, I published a study on Rate shopping sites.   These sites were gaining popularity with consumers as a  place to go if you wanted to get the best rates.  And they attracted a lot of attention.

You know the sites… they have catchy ads like ‘shopping for the Best Mortgage rates in Canada’ or ‘comparing Canada’s mortgage brokers for the best rates’.  
Hey, who doesn’t want the best rate?  These ads work. Canadians were clicking these links to get more info.

Sounds great, right? Yet, it’s not.  

LOWEST RATE OR PAY THE LEAST AMOUNT OF MONEY TO OWN YOUR HOME?

The original study found that consumers wouldn’t ask too many questions. They were too rate focused and didn’t focus on the terms of the mortgage.  Most consumers don’t bother asking any further questions or spend the time required to read the 30 or 40 pages of legal jargon in their mortgage.  And this where it can become a costly experience.

The original study showed that if you asked a borrower whether they wanted the ‘lowest rate’ or to ‘to pay the least of money on their mortgage’ , the average person would choose the latter.   And make no mistake, these are two very different things.. (I suggest you read the original study for a more thorough explanation).    

My original study revealed that these sites didn’t shop all mortgage brokers or lenders.   The sites listed only a small handful of brokers.  Only brokers that got in early, would be compared….and only brokers that were willing to pay a fee per lead, can participate.   The ‘low rates’ were NO FRILLS products, in most cases…products that carried restrictions, limitations and inflated prepayment penalties.   Hardly a true comparison of ‘All mortgages and All mortgage brokers’.  And hardly unbiased.

Today, not much has changed..  well, that’s not true.   They’ve become worse.  Here’s an update:

• One of these large sites was purchased by another online rate site.  A quick review of their current rate offerings revealed they no longer had competitive rates.  It’s advertising rates well above the best in today’s market.  They seem to just be promoting Banks rates… which are higher than broker rates.
• Another popular site has a BIG conflict of interest, in my opinion.  They decided to start their own mortgage brokerage but are still running and operating their Rate shopping site.  Seriously, it’s true!  This raises the obvious question, ‘how can they remain unbiased and neutral when they own one of the brokerages they are comparing?’  It’s like asking TD Waterhouse or Investor’s Group who has the best Investment Advisors?   Or like asking Burger King or McDonald’s, ‘who makes the best burgers?’.   If I ask Rogers who has the best cell service, I wonder if they will say ?  
• And yet, you’ve see these sites advertised and promoted in our country’s largest newspapers, as unbiased and independent!!   Anyone else see a problem with this.

HOW TO PAY THE LEAST OF AMOUNT OF MONEY TO OWN OUR HOMES

Hey, if you want to compare rates, it’s easier today. Just contact an experienced mortgage broker.  They’re not hard to find. Mortgage Brokers account for between 30% to 40% of all mortgage originations in Canada. Ask a friend, your real estate lawyer, your real estate agent or financial advisor for a referral.  

Most good brokers will have access to 40 or 50 competing banks, trust companies, insurance companies and other mortgage origination corporations.   A broker already SHOPS the market, so you don’t have to.   A broker deals with the wholesale mortgage rates, not retail branch rates!   They’ll not only compare a few hundred different products, they can explain the differences in the products.   They’ll take the time to analyze your needs, your goals and your personal situation. They’ll make unbiased recommendations!

And the good news is, the broker’s service is FREE for qualified applicants.  A good mortgage broker will offer you unbiased, market neutral advice.  Look for an experienced Broker.  Ask where their clients come from.  I think you will find it’s mainly referral based.  Most of my business comes from previous and existing clients.  I’m also referred by my business partners such as lawyers, real estate agents, accountants, financial advisors.    And I’m truly humbled and honored to be recommended.   Only satisfied clients and partners will make recommendations.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca