Brokers may be soon be hurting for renovation-led refis, as a growing number of Canadians cancel plans to spruce up or completely redo the old homestead.
The latest Annual BMO Home Renovation Report suggests fewer Canadians are planning home renovations this year, with only 51 per cent prepared to take on that work in the next 12 months. That`s down from the 62 per cent who were renovation-ready in 2011.
The change of plans is likely a reflection of more stringent refinancing rules ushered in by the federal government early last year. They reduce just how much equity a borrower can take out of a home.
More such changes are on the way, specifically around HELOCs as OSFI prepares to introduce its own tighter regime of underwriting standards for federallhy-regulated lenders.
The sum total of those moves is likely to be the further retrenchment of consumers, unwilling or unable to undertake renovations. It means the classic renovation refi may be harder for brokers to come by this year.
The development may put an end to what has been a very brief upswing in HELOC-related broker originations.
Last fall, MortgageBrokerNews.ca reported that brokers in key markets were benefiting from the record number of Canadians renovating their homes rather than placing those properties on an increasingly slow yet price-stable market.
“Yes, we see a lot of clients coming in with plans to do upgrades and other renovations,” Leslie Penney, VP of business development at APlus Mortgage Group, told MortgageBrokerNews.ca . “I would easily say that two out of every three HELOCs is done for renovation purposes because it gives the client more flexibility – it’s not a one-time shot like a refinance. I’ve found that it’s more common with investor clients who have multiple properties and will use a HELOC on one property to do the renovations on several, or clients who plan on undertaking major renovations.”