Market share of private lenders is eating up the originations of traditional lenders
A new analysis by real estate information portal Better Dwelling showed the waning popularity of traditional mortgages among would-be home buyers in the Greater Toronto Area, with originations of traditional lenders (such as banks) in the region falling by a significant 27.01% year-over-year in Q1 2017.
Using data from the Bank of Canada to estimate dollar volumes, the first quarter of the year saw $24.46 billion in originations, which was 0.8% lower compared to the previous quarter.
Better Dwelling also noted that traditional lenders issued 92.13% of mortgage dollar volumes in Q1 2018. This was noticeably lower that the 92.43% in the previous quarter.
“The slight loss brings the total market share down by nearly 2 points since last year. The market share lost is being picked up by private lenders with steep mortgage rates,” Better Dwelling wrote.
Read more: Latest Toronto numbers bring first signs of market stability – analysts
Observers have noted that this market shift can be largely traced to B-20, which have pushed lenders towards private lenders that are not compelled to apply the stress test to borrowers.
But Better Dwelling argued that this was not a convincing chain of events.
“Naturally, the industry is assuming buyers are trying to dodge stress tests,” Better Dwelling stated. “It’s a cute narrative, but it doesn’t really make sense. Traditional lenders have been losing market share since before B-20 Guidelines were mandatory. More likely, less sophisticated money that couldn’t qualify at traditional lenders, began to pour into the market.”
Overall, the total dollar value of mortgage originations in the GTA was a little over $26.55 billion in the first quarter of 2018, falling by 0.47% from the previous quarter and by 25.3% compared to the same time last year. This was roughly in lockstep with an observable decline in sales during the same time frame, analysts said.
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