Initial interest in credit unions offering HELOCs above 65 per cent LTV appears to have died down, with some brokers suggesting borrowers appear satisfied with the OSFI-mandated cap.
“Right now a lot of my clients are saying they don’t need a line of credit,” said Gale Tracey, a broker at Mortgage Architects in Surrey, B.C. “I don’t think borrowers are ready to pay a credit union a higher rate to get an LTV above 65 per cent when lenders like TD and MCAP are offering attractive rates of prime plus 0.5 per cent.”
Earlier this week, it was reported that a credit union in Vancouver began charging borrowers a 0.5 per cent higher rate for HELOCs with an LTV higher than the current OSFI-mandate 65 per cent. Since credit unions are not federally regulated lenders, they can continue to offer maximum LTVs of up to 80 per cent. In recent months, several credit unions reported an increase in business due to borrowers seeking higher LTVs.
However, Tracey doubts that the volume of borrower interest would justify a rate hike by credit unions.
“I haven’t heard of any credit union in Vancouver bumping up their rate and I don’t think we should be worried because borrowers are not looking for a line of credit,” she said.
Another B.C. broker agrees.
“Only a very small percentage of the typical broker’s clients opt to go to credit unions,” according to Dustan Woodhouse, broker with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland. “Going to a credit union just because of the 80 per cent LTV doesn’t make much sense anyway.”
Borrowers can still get the equivalent of an 80 per cent LTV from a bank, he said.
“The banks offer 65 per cent LTV, but you can still get the remaining 15 per cent if you purchase a fixed mortgage product,” Woodhouse said.