
Today we are faced with rising interest rates, high inflation, and a slowing economy. For most people who work in the mortgage industry today this is not something they have experience with. Even after the 2008 crash there was barely a blip in the Canadian housing market and that means most people have no idea how to survive in a changing economy.
The thing is, for us we are a bit luckier than most because when I first started in financial services, it was the early 1990's. I learned how to be successful in an economic climate that was even worse than today! Let me share some of my thoughts on how I was able to still be successful in a time of high unemployment, high interest rates, and high inflation.
The first thing to recognize is that we are currently in the down swing of the pendulum, we have reached peak and it is starting to sputter. This means that while there is concern, and some fraying, the general economy is still somewhat resilient. People are still spending, still using credit, still buying homes, and they are still working. That means that people still need mortgages, be it to refinance or to purchase, the business is out there.
There is also an immense opportunity for an entirely new channel of business, consolidation lending. This is just a different way to say "refinance to pay off debts", but it is a powerful tool in challenging times. Let me explain how this works, and how we can use this as a tool to generate mortgage leads both online, and through other campaigns.
Consolidation Lending is a term that I first heard when I was working at AVCO Financial Group. It was a way of selling consumers on obtaining some financial relief through a financial review and the funding of a consolidation loan/mortgage. We just called it those products instead of refinance, debt consolidation, or equity take out and that seemed to resonate with people.
When we were doing our sale to the customer, we focused very heavily on the amount we were able to reduce their monthly obligations, and then showed them how to pay it all off sooner. When you focus on the following key selling points, it really does make a lot of sense.
1) Monthly Payments have the single largest impact on a person's ability to live a healthy lifestyle. The buy now, pay later mentality of society has trapped people into poor financial management. They see their monthly payment will "only go up by a couple of dollars" and they justify their spending that way until they are drowning.
People really only care about the interest rate because of how much it impacts their monthly payment. The vast majority of Canadians now say that they will never be debt free, and they are just fine with it. As long as they can afford their monthly payments.
How to sell it? Rather than focusing on rate, focus on the cost savings when you consolidate a high interest lending product into the mortgage. Sure, they are paying more on the mortgage, however they are saving on the other debts. With the consolidation they are better situated and with the right plan, can even pay off their mortgage sooner.
Reduced over all monthly payments achieves two major things. (A) The customers daily stress level drops significantly, and that leads to healthier customers. (B) That extra money, even if it is only $300 per month, could mean the difference between groceries or heat for a lot of families.
2) Rates were MUCH higher when I was selling this stuff. They were at 9 - 12% bank mortgage, and at AVCO we were selling mortgages at 18.95 and 25.95 - 29-95 for loans. In 1995 I closed over 140 loans and 5 mortgages in a single month... in Whitehorse, Yukon which at the time had the highest unemployment rate in Canada.
What I am saying is that our customers focus on rate because we as an industry focus on rate. Rate is important, but it can also be an enemy. Look at all those people who were convinced to go into variable rate mortgages without really and truly understanding the risk. Now all of those people are faced with drastic increases in their mortgage payments, on top of the other payments they have to make because they have been living off of their credit cards.
If they have equity, a new mortgage with a stretched amortization, and a full consolidation with the closure of most cards, etc. can literally save lives. Financial stress is one of the highest causes of suicide, spousal abuse, and divorce - if we can alleviate that stress in any way - we should. We do that by showing our clients how their daily living will improve by doing a Consolidation Mortgage and restructuring their debt.
The last item that we should all remember as mortgage professionals. There is an option for our customers, one that is deeply unpopular with most mortgage brokers, but it is an excellent solution for the consumer. I speak of the Increase and Blend mortgage product that has been available from most lenders for decades.
Simply put, when a borrower has an existing mortgage at a certain rate, and they wish to borrow more money, the lender adds the new money to the existing mortgage, and blends the new rate with the old. Cool Right?
So why don't most broker like this product? Well, because they only get paid on the new money. If the customer is doing a 500k mortgage, but the new funds are only for 50k, they only earn commission on the 50k.
The thing is... I would rather do 100 Increase and blends and help 100 customers than only do 10 mortgages and only help 10 people. I would rather be busy than not.
I am not saying that everyone should always do the Increase and Blend product, but I am saying that if it means getting a deal done and helping a customer, we should be doing it. Those customers will remain with us for years to come with repeat business and referrals.
What the marketing tip you ask? Simple.
A) When you are speaking to your customers, focus on monthly payments and look at how you can save them money and ease financial stress.
B) Start using the term Consolidation Mortgage, or even Credit Restructure (try to stay away from the words; debt, debts, liabilities, or anything that is negative).
C) When you are doing a review with your clients, make sure to fully explain all of their option to them, and if you can - send them a written plan that shows them what they are saving in black and white. They cannot see your voice; they cannot go back to it over and over again. People need to see not just hear to fully understand the choice presented to them.
D) Focus on the ways you can structure their payment to save even more interest if they are particularly stressed about the rate. Remind them that this is a fix that saves them today and when (if) rates drop we can do a reduction.
E) Last, but not least - start marketing the increase and blend and get the word out there that there are options to save money, restructure credit, and ease financial stress with a Haystax Consolidation Mortgage.
During more challenging economic times it is incumbent on us to change the way we approach driving new business. Rather than expecting the marketplace to adjust, we need to adjust to meet the needs of the market. That will provide us with the best options for the future.
I have created some online marketing pieces that can be used as posts in social media to help get the messaging out there.
I will also be developing some more specific sales tools and will be launching those in the coming days and weeks. DO NOT wait for those tools, get out there today and start getting the message out.
Remember this key information: A person needs to hear/see something 7 times before they internalize it.
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