Close X
Thursday, November 28, 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

    Richmond Police Make Double Arrest After Sharp-Eyed Neighbour Reports Break-in

    Richmond Police Make Double Arrest After Sharp-Eyed Neighbour Reports Break-in
    Shortly before 1 AM on September 1st, 2016, Richmond RCMP officers from Alpha Watch responded to a residence in the 7000 block of Afton Drive. 

    Richmond Police Make Double Arrest After Sharp-Eyed Neighbour Reports Break-in

    Canada Now Allows Prescription Heroin In Severe Opioid Addiction Cases

    Canada Now Allows Prescription Heroin In Severe Opioid Addiction Cases
    VANCOUVER — Health Canada has amended regulations allowing doctors to prescribe heroin to people who are severely addicted to opioids.

    Canada Now Allows Prescription Heroin In Severe Opioid Addiction Cases

    Toronto Faces School Bus Driver Shortage; Boards Scramble To Get Kids To School

    Toronto Faces School Bus Driver Shortage; Boards Scramble To Get Kids To School
    TORONTO — More than 1,000 children in Toronto are either getting to school late or not going at all due to an "unanticipated" bus driver shortage.

    Toronto Faces School Bus Driver Shortage; Boards Scramble To Get Kids To School

    Toronto Man Completes Solo Swim Across The English Channel In 15 Hr 25 Min

    Toronto Man Completes Solo Swim Across The English Channel In 15 Hr 25 Min
    A 30-year-old Toronto man has become the latest Canadian to successfully complete a solo swim across the English Channel.

    Toronto Man Completes Solo Swim Across The English Channel In 15 Hr 25 Min

    Hockey Player Who Pushed Ontario On Transgender Inclusion Hopes For More

    Hockey Player Who Pushed Ontario On Transgender Inclusion Hopes For More
    Jesse Thompson wanted transgender inclusive policies for hockey dressing rooms to be implemented sooner and for them to be Canada-wide, but says an important first step is happening in Ontario.

    Hockey Player Who Pushed Ontario On Transgender Inclusion Hopes For More

    Harjit Sajjan Says Canada To Host Peacekeeping Summit Next Year

    Harjit Sajjan Says Canada To Host Peacekeeping Summit Next Year
    OTTAWA — Defence Minister Harjit Sajjan says Canada will host a peacekeeping summit next year, even as Conservative MPs accuse the government of playing politics with Canadian troops.

    Harjit Sajjan Says Canada To Host Peacekeeping Summit Next Year