Stress tests have improved quality of newly originated mortgages, but also bring uncertainty in number of borrowers who qualify
MCAN Mortgage has reported a net profit of $11.1m for the second quarter this year, 24% higher than the same period in 2017.
Its impaired total mortgage ratio decreased significantly to 0.02% in June from 0.10% the previous quarter. Meanwhile, its impaired corporate mortgage ratio decreased to 0.03% from 0.22% at the end of March.
Total mortgage arrears rose over the quarter to $21m from the previous $19m. The June 30 balance consists entirely of single family mortgages, $3.8 million of which were uninsured.
According to the firm, the introduction of new mortgage stress tests at the start of the year have created uncertainty in terms of the number of borrowers that qualify for new mortgages. However, these tests also provided for an improvement in the quality of newly originated mortgages.
“We estimate that the uninsured stress test has impacted approximately 10-15% of mortgages that we underwrite based on the borrower's ability to service the higher mortgage rates used in the stress test, and will continue to have some impact on the proportion of mortgages that we approve,” MCAN added.
Looking ahead, it expects the housing market conditions to experience volatility and uncertainty in 2018 as conditions continue to face headwinds as consumers face a rising interest rate environment, making mortgages less affordable.
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