HELOCs and Lines of Credit have all but dried up for some brokers, while others continue to rely on them for their bread and butter.
“There’s been a decrease in the number of investor clients and property speculators, definitely,” says Brad Compton, a mortgage agent with Invis. “We have seen fewer HELOCs – in fact, I haven’t done a HELOC since December 2011.”
Growth in HELOCs and other lines of credit have slowed to a virtual standstill, according to a recent Equifax report, describing “very moderate growth in Lines of Credit and HELOCs likely due to housing market speculation and increased regulation.” The March Consumer Credit Trends Report released on Tuesday pegs that rise at a meagre 3.3 per cent from $242.5 billion for March 2012 to $250.6 billion for last month.
Compton isn’t surprised by those numbers, seeing investors turn to more lucrative avenues to access equity.
“Investors are either finding the money somewhere else, or they are just drawing on the equity in their home by taking a normal mortgage,” Compton told MortgageBrokerNews.ca. “Usually they own a home outright, and they will just use fixed mortgage on that. It is better than a HELOC – you can finance up to 80 per cent on a 5 year fixed, as opposed to the 65 per cent you get on a HELOC.”
Canada’s COO John Kelly sees the new regulations on mortgages as having an impact on the HELOC market.
“The new OSFI regulations restricting the loan to value maximum for new HELOC's has definitely had an impact on that products growth in the market,” says Kelly. “In general there seems no doubt that the new regulations have cooled the growth of credit markets in Canada significantly, which of course is the Minister of Finance's express intent - but it also may be unduly cooling the housing market, and presumably the construction and home renovations markets, too.”