ING Direct, which was bought by Bank of Nova Scotia last fall, is going to stop selling mortgages through brokers, although it will still sell them directly to consumers.
It’s the latest signal of a shift in the industry, as banks seek to re-inflate their profit margins. Last summer Canadian Imperial Bank of Commerce, once the largest lender in the broker channel, decided to stop using brokers. Months later First National Financial Corp. and Bank of Nova Scotia cut the commissions that they pay to brokers after years of rising compensation.
“Following the recent acquisition of ING Direct by Scotiabank we have completed a thorough evaluation of our mortgage business and have come to the decision that ING Direct will concentrate its origination efforts on its direct channel and transition its broker business to Scotiabank,” ING Direct said in a letter to brokers, a copy of which was obtained by The Globe and Mail.
“We determined through our review that there was considerable overlap between Scotiabank’s and ING Direct’s broker businesses in terms of broker partnerships and product offering,” it said. “We felt that both ING Direct’s and Scotiabank’s objectives would be better served by allowing each entity to focus its efforts on its own relative strengths.”
The letter added that Scotiabank remains fully committed to the broker market.
Alyssa Richard, chief executive officer and founder of RateHub.ca, where consumers can search for mortgage rates, said she feels the move is disappointing for brokers.
“It’s more consolidation in an industry that I feel is already an oligopoly,” she said. “It reduces consumer choice.”
Scotiabank is Canada’s biggest lender through mortgage brokers.
“This strategy change is a 180 [degree turn] for ING, which currently sources most of its business from brokers,” Rob McLister, editor of Canadian Mortgage Trends, wrote in a blog post. Now ING, which at some point will be given a new name by Scotiabank, will sell directly to consumers by way of call centres and the Internet.