With the introduction of the new mortgage stress test in January many believe the market could come to a simmer. However, just over a month in and the condo market continues to boom. Vancouver condo prices hit a record high of $1,090, 317 in January. Buyers are eagerly pulling the trigger in order to beat out expiring rate holds and rising mortgage rates. Meanwhile as some borrowers face getting squeezed out, the shift to private lenders is growing. Some private lenders are seeing business double or triple.
The new mortgage “stress-test” is causing a growing number of would-be homebuyers to look to private lenders and credit unions for financing. The story tonight on @GlobalBC #StressTest #HousingMarket pic.twitter.com/sHvpBrDNJX
— Kylie Stanton (@kyliestanton) February 6, 2018
Dave Teixeira, vice president of operations at Dominion Lending, says “Dominion mortgage brokers are seeing a higher rate of rejection and clients have to submit multiple applications to various institutions before finding a lender that works.”
As a result, Teixera adds, “Normally, we would see our volume going to the big banks and monolines, and now we’re seeing a little bit more of that, roughly up to 20 per cent… moving over to credit unions.”
Robert McLister, a mortgage planner at IntelliMortgage and the founder of RateSpy.com summarizes the situation, “The demand is shifting down the ladder, so you have these less regulated lenders with higher risk tolerance now seeing materially more business. And they can charge more, and they can be pickier with the types of borrowers that they lend to.”
This is common late cycle behaviour as borrowers begin seeking out more creative ways to obtain financing. The shift away from traditional banks and towards the mortgage broker channel grew noticeably in 2017 and will surely grow larger in 2018.
Source: HedgeyeAs per the data which is sourced from CMHC, first time buyers, who arguably need the most help with financing, provided the largest percentage change year over year, growing from 26% to 35% in 2017.