This deception is possible due to how broker fees are currently structured, based on the interest rate and not the loan amount, which incentivizes brokers to mark up rates higher than what the borrower could have gotten elsewhere. As a result, it becomes difficult for consumers to know exactly how much of an impact a broker’s markup had on their loan amount.
McLister cites a report by the Bank of Canada that shows consumers in Canada are paying thousands of dollars more than they need to in order to fund their mortgages due to rate markups. He argues that this problem could be remedied by restructuring the way broker fees are calculated, so that brokers are compensated based on the loan amount rather than the interest rate. With this system, lenders would no longer be able to charge hidden premiums as part of their fee structure, allowing consumers to get the best deal possible.
McLister also suggests that the government should create a Mandatory Broker Code of Conduct that spells out what constitutes acceptable behavior for brokers. This code would give consumers a clearer understanding of the services they can expect from a broker and ensure that brokers follow ethical practices when working with clients. In addition, he proposes that the government build an online “shopping mall” with accredited lenders, ensuring that consumers have access to price comparisons when searching for the best mortgage rate.
Overall, McLister’s article highlights an important issue that needs to be addressed if the Canadian mortgage market is to become fair and transparent for consumers. He provides several solutions that could be implemented to help protect consumers from broker markups and other hidden fees, while also ensuring that brokers receive a fair compensation for their services. By implementing these solutions, the Canadian government can help to ensure that everyone involved in the mortgage process receives a fair deal.
This article was contributed on Dec 20, 2023
