Executives discussed strategies at the 2024 Canadian Mortgage Summit
Canada’s economy has been through a rollercoaster in recent years and there could still be some bumpiness ahead – but lenders in the mortgage space are taking a calm and focused approach to the current market.
That was the message delivered at last week’s Canadian Mortgage Summit in Brampton, which saw executives from prominent mortgage lenders take to the stage to share their thoughts on the present landscape and the outlook for the coming months.
Surging interest rates and higher borrowing costs in recent years have presented their fair share of challenges for Canadian homeowners, while a slowing economy and rising unemployment were among the reasons for the Bank of Canada’s recent moves to bring its own benchmark rate lower.
Still, that hasn’t significantly soured the outlook for lenders with their house in order, according to Haventree Bank vice president of national sales Susan Thomas (pictured, top left). She described a “stable” state of play boosted by an inflow of GIC money when interest rates continued to rise.
Securitization – the process by which lenders pool mortgages together and sell them on their secondary market – has also been a growing trend in the alternative lending market, according to Thomas. “[Initially] a lot of banks were not interested in alternative lending,” she said.
“But as our quality has increased over the years, there is an appetite now for banks to get into securitization of the mortgage business from alternative lenders.”
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The nation’s biggest banks have tightened their lending criteria since the pandemic and adopted a more conservative approach to lending, seeing a growing number of Canadians turn towards alternative lending to fund their borrowing needs.
Sebastien Kuperhause (pictured, middle left), director of business development at Community Trust, said that the company hadn’t necessarily seen a different borrower profile over the past year, and highlighted an average FICO score in the alternative space of between 700 and 740. “I started in the alt-space seven years ago. It has never gone below [700],” he said.
Mortgage defaults remain low despite fears
Rising rates since the lows seen during the COVID-19 pandemic sparked fears of a wave of delinquencies in the mortgage space, especially with scores of borrowers facing renewal at rates significantly higher than their original agreement.
But that doomsday scenario has thus far failed to play out. A recent study by the Canadian Bankers Association (CBA) should more than 99% of mortgage holders across the country remain in good standing, while the overall share of mortgages in arrears remains well lower than in other economies including the United States and United Kingdom.
Leanne Conroy (pictured, middle right), regional sales director at MCAN, said that a slight uptick in a specific type of property defaults had been a noted trend this year in the overall market. “Where [it’s being seen] is in rental properties,” she said.
“And we could probably go on and have a completely separate panel on rental properties – the why, the when, the how, the ‘Why don’t we want this?’ But that’s where, from an MCAN perspective, we haven’t seen a lot of defaults.”
What’s in store for the months ahead?
Despite the coming wave of mortgage renewals in 2025 and 2026, lenders remain calm on the prospect of further delinquencies down the road.
Susan Fidgen (pictured, top right), senior manager of regional sales at CWB Optimum Mortgage, said the company is seeing a “relatively minor” level of delinquency in its mortgage book. “It’s manageable, and we feel pretty confident that our clients are going to come through this period of economic challenge,” she said.
She noted the several funding sources available to the bank on the liquidity front, and suggested early signs were emerging of a more positive economic outlook for 2025 – not least because falling interest rates are easing concerns for many borrowers facing higher costs when renewing their mortgage. “We move through this cycle with the economy,” she said.
“We’re going to see things start to recover. Affordability will hopefully start to balance out a little bit better with rates coming down. The market has started to pick up a little bit. So we remain pretty optimistic, given the times.”
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