Would You go to Wal-Mart for a Mortgage?
The idea of retail stores opening up a mortgage business is really nothing new. Costco started offering mortgages here in Canada in 2010, and the retail giant has recently opened its doors on the mortgage business in the United States, too. Several years ago Canadian Tire tried to open its own little mortgage side business, until 2009 when it had to shut their mortgage business down in order to refocus on things like auto parts and hockey sticks once again. So, with these past cases we’ve already seen, it really shouldn’t surprise anyone that one in three U.S. consumers would consider getting a mortgage from Wal-Mart.
Even though these are American stats, they most likely resemble what many mortgage customers right here in Canada are thinking: we want more choice. We want more options. We want to save more money. And it doesn’t matter how or where it’s done.
It was a Carlisle & Gallagher survey of 618 mortgage consumers in December that found 33 per cent would consider purchasing their mortgage from Wal-Mart. And nearly half would go with an online financial institution such as PayPal. Currently neither company offers mortgages, although PayPal does have a line of credit they offer to customers.
It’s this fact – the fact that neither company is in the mortgage business – that should be especially disheartening for banks, as it shows that customers will go just about anywhere if it means they can get a better price. Also, further results in the study show that consumers are straying farther and farther away from banks as they continue to look for not only the best mortgage deal, but also the easiest.
The majority of people, 70 per cent, would in fact still like to use their main bank for their mortgage, so there is hope for those institutions. But still, only 39 per cent of them actually do, and that’s for a number of reasons. 65 per cent said that the cost of mortgages at a bank are simply too high; while 56 per cent said the process was too slow; and 32 per cent found it difficult to communicate with the lender at big banks.
Doug Hautop, lending practice lead at Carlisle & Gallagher, says that this should serve as a real wake up call for banks. Consumers want and prefer to do business with them because of security and convenience reasons. But other factors, such as having to deal with a huge corporation who often makes it feel as though they don’t care about the little guy, are keeping them from doing so.
“There is a real threat from new entrants,” he says. “Banks have a captive audience, and people who are willing and wanting to do business with them. It means it’s time to get back to the basics for our banks.”
What do you think? Do we have the same problem with our banks here in Canada? And do you think this trend, of Wal-Mart and PayPal offering mortgages, will catch on here?