Here’s what these industry professionals have witnessed
Ambivalent consumers appear to be taking the plunge into homeownership before OSFI’s rule changes take effect on January 1.
By most accounts, homeownership will become less attainable for a sizeable portion of the consumer market by the beginning of next year, and it appears that many are less reticent about pulling the trigger on one of the biggest financial decisions they’ll ever make.
“I’ve talked to a number of realty brokers and mortgage brokers, and more so from the real estate broker side they’re seeing a flurry of activity,” said Mortgage Architects President, Dong Lee. “They’re informing customers of the potential impact of the rule changes, so those on the border are making decisions quickly to either get into the market or wait for the market to change. So, really, you’re seeing a lot of people trying to get in before everything changes.”
Lee says Canada’s two most expensive markets, Vancouver and Toronto, will feel the mortgage rule changes the most, and are likely the two places wherein the most buyer activity will occur before January 1. But they aren’t the only places.
“I think the impact is in the bigger markets, where it’s harder to qualify for mortgages, but we’re seeing it everywhere,” he said. “I was talking to a broker in Calgary and they’re starting to see it too.”
Mortgage holders who come up for renewal in the new year may experience problems with their renewals.
“The challenge for those who come up for renewal in five years is may be that they don’t have another lender to go to,” said Lee,” so, in other words, their only option may be to renew with who they’re with. If they try to transfer or refinance somewhere else they may run into problems through qualification.
“I think another big problem is a lot of private mortgages out there, where the thought was ‘I’m going to convert them into an institutional A or Alt-A lender, those exit strategies might not be there anymore, and I think that’s more of a concern for some of those lenders out there who lend privately.”
Diane Bertolin, a mortgage agent with Unimor Capital Corporation, doesn’t expect a huge spike in business – although she has received more enquiries – but she believes mortgage agents and brokers will see a boost elsewhere.
Where I think you might see a flurry of change or business for a mortgage agent or broker is if somebody wants to refinance,” she said. “I’m sure agents will go through their rolodexes and inform clients if their purchasing power is a little better right now, or if they want to consolidate some debt or do some home renovations so that they’re not subject to stress tests if they want to be with a bank.”
Bertolin doesn’t think there’s as much incentive for consumers to act just yet because credit unions have been mum.
“We haven’t heard whether or not the credit unions are going to adopt the rules,” she continued. “When the first stress test came out, of course they had to because they were insured mortgages and they had to comply with CMHC, but with these mortgages credit unions have a lot more leeway. They’ll adjudicate them based on loan-to-value, credit history, all that stuff and they’re not subject to the Bank Act.
“They have their own stress tests, but they tend to have a lot more leeway. I think the other big winner is going to be the B lenders who have a lot more latitude, and I think the consumer will be more savvy in terms of who they deal with. I think the credit unions will be the big winners in all this at the expense of the banks.”
Related stories:
Will OSFI regulations really strip consumers of choice?
Stress tests are bad news for non-prime lenders—RBC
Report calls intervention unnecessary
By most accounts, homeownership will become less attainable for a sizeable portion of the consumer market by the beginning of next year, and it appears that many are less reticent about pulling the trigger on one of the biggest financial decisions they’ll ever make.
“I’ve talked to a number of realty brokers and mortgage brokers, and more so from the real estate broker side they’re seeing a flurry of activity,” said Mortgage Architects President, Dong Lee. “They’re informing customers of the potential impact of the rule changes, so those on the border are making decisions quickly to either get into the market or wait for the market to change. So, really, you’re seeing a lot of people trying to get in before everything changes.”
Lee says Canada’s two most expensive markets, Vancouver and Toronto, will feel the mortgage rule changes the most, and are likely the two places wherein the most buyer activity will occur before January 1. But they aren’t the only places.
“I think the impact is in the bigger markets, where it’s harder to qualify for mortgages, but we’re seeing it everywhere,” he said. “I was talking to a broker in Calgary and they’re starting to see it too.”
Mortgage holders who come up for renewal in the new year may experience problems with their renewals.
“The challenge for those who come up for renewal in five years is may be that they don’t have another lender to go to,” said Lee,” so, in other words, their only option may be to renew with who they’re with. If they try to transfer or refinance somewhere else they may run into problems through qualification.
“I think another big problem is a lot of private mortgages out there, where the thought was ‘I’m going to convert them into an institutional A or Alt-A lender, those exit strategies might not be there anymore, and I think that’s more of a concern for some of those lenders out there who lend privately.”
Diane Bertolin, a mortgage agent with Unimor Capital Corporation, doesn’t expect a huge spike in business – although she has received more enquiries – but she believes mortgage agents and brokers will see a boost elsewhere.
Where I think you might see a flurry of change or business for a mortgage agent or broker is if somebody wants to refinance,” she said. “I’m sure agents will go through their rolodexes and inform clients if their purchasing power is a little better right now, or if they want to consolidate some debt or do some home renovations so that they’re not subject to stress tests if they want to be with a bank.”
Bertolin doesn’t think there’s as much incentive for consumers to act just yet because credit unions have been mum.
“We haven’t heard whether or not the credit unions are going to adopt the rules,” she continued. “When the first stress test came out, of course they had to because they were insured mortgages and they had to comply with CMHC, but with these mortgages credit unions have a lot more leeway. They’ll adjudicate them based on loan-to-value, credit history, all that stuff and they’re not subject to the Bank Act.
“They have their own stress tests, but they tend to have a lot more leeway. I think the other big winner is going to be the B lenders who have a lot more latitude, and I think the consumer will be more savvy in terms of who they deal with. I think the credit unions will be the big winners in all this at the expense of the banks.”
Related stories:
Will OSFI regulations really strip consumers of choice?
Stress tests are bad news for non-prime lenders—RBC
Report calls intervention unnecessary
