Close X
Monday, November 25, 2024
ADVT 
National

Canadians May Face Higher Mortgage Rates With Changes, Mortgage Brokers Say

The Canadian Press, 07 Oct, 2016 12:47 PM
    OTTAWA — Mortgage lending changes by the federal government are going to make it harder for non-bank lenders to operate and could see Canadians pay higher rates on their loans, mortgage brokers warn.
     
    James Laird, president of mortgage company CanWise Financial and co-founder of rate-watching website RateHub, says the non-bank mortgage lenders offer important competition for the big banks.
     
    "The non-bank lenders keep the banks honest," Laird said.
     
    "It is really important that we keep some sort of third-party pressure on them so they can't set prices at whatever they choose."
     
    Starting Nov. 30, mortgages that lenders insure with portfolio insurance and other discretionary low loan-to-value ratio mortgage insurance must meet stricter criteria that had previously only applied to high-ratio insured mortgages.
     
    The rules place new limits on the types of mortgages that can be insured.
     
    The change, brokers say, will make operating more difficult for non-bank mortgage lenders, who raise the money they use to lend to homebuyers by selling packages of insured mortgages to investors.
     
     
    The large banks use portfolio insurance too, but they also have other ways to raise the money they use to lend to borrowers seeking mortgages.
     
    "The banks were also heavy users of the bulk insurance program, but they don't have to be," Laird said. "A bank has its own money to lend if it chooses to, where a non-bank does not."
     
    The tighter requirements were part of broad changes that also expanded stress testing on insured mortgages, proposed consultations on lender risk sharing and closed a loophole in connection with the capital gains tax exemption on the sale of a principal residence.
     
    Sherry Cooper, chief economist at mortgage broker network Dominion Lending Centres, said because of the lessening of competition, mortgage rates paid by Canadians will be now be higher.
     
    "Less competition means there's less supply in the marketplace and as a result the price goes up a bit. How much, we don't know, and how big an impact this will be is still quite uncertain," she said.
     
    But Cooper said it's still early days, and that the non-bank lenders are talking to the Finance Department regarding what they can and cannot do.
     
    "I think there is still a lot of uncertainity out there, but I do think at that the end of the day, it does reduce competition," she said.
     
    In announcing the changes, the federal government said it wanted to ensure safe lending.
     
     
    "The federal government is serious about its responsibilities, including making sure that our housing policy framework remains healthy, competitive and stable, protecting all Canadians and the economy from potential excess housing market volatility," Finance Minister Bill Morneau said.

    MORE National ARTICLES

    International Law Firm Dentons Hires Former Prime Minister Stephen Harper

    OTTAWA — Former prime minister Stephen Harper has landed himself a job with an international law firm.

    International Law Firm Dentons Hires Former Prime Minister Stephen Harper

    Halifax Asks Residents To Trade In Unwanted, Unregistered Guns For Bus Tickets

    Halifax Asks Residents To Trade In Unwanted, Unregistered Guns For Bus Tickets
    The municipality launched a promotion Monday that encourages people to turn in unwanted and unregistered firearms in exchange for Halifax Transit tickets.

    Halifax Asks Residents To Trade In Unwanted, Unregistered Guns For Bus Tickets

    Centre To Honour Residential School Survivors Breaks Ground At UBC

    Generations of her family would experience the abusive system with Tom-Lindley herself spending three intermittent years at the Kamloops Indian Residential School.

    Centre To Honour Residential School Survivors Breaks Ground At UBC

    If Potential Terrorists Can't Be Monitored 24/7, Jail Them: Clement

    OTTAWA — Conservative leadership candidate Tony Clement says if people at high risk of committing terrorist acts cannot be monitored around the clock, they should be behind bars.

    If Potential Terrorists Can't Be Monitored 24/7, Jail Them: Clement

    Man, 31, Charged With Fraud In Alleged Tragically Hip Online Ticket Scam

    Man, 31, Charged With Fraud In Alleged Tragically Hip Online Ticket Scam
    KINGSTON, Ont. — A southwestern Ontario man is facing a fraud charge for allegedly advertising Tragically Hip tickets online and not delivering the product.

    Man, 31, Charged With Fraud In Alleged Tragically Hip Online Ticket Scam

    Four Teens Identified As Small Fire At North Vancouver School Damages Roof, Gym

    Four Teens Identified As Small Fire At North Vancouver School Damages Roof, Gym
      RCMP say the blaze early Sunday evening caused moderate damage to the roof of Dorothy Lynas Elementary School.

    Four Teens Identified As Small Fire At North Vancouver School Damages Roof, Gym