Brokers relying on investor clients to shore up the bottom line are now watching as key lender decisions erode that once lucrative business.
“We’re into a scenario where not only do lenders charge more for investment properties, they have caps on how many investment properties a client can own or they just cut off investment properties all together,” Jessi Johnson of the Verico Jessi Johnson Mortgage Team told MortgageBrokerNews.
“The deals are still there, what’s happening is that it takes longer to get them done. You’re getting turned down consistently by lenders who would have normally done these transactions before or there are circumstances where you simply can’t get them done and you have to go commercial.”
His Vancouver brokerage is grappling with several client files where investors with large portfolios are struggling even to renew mortgages.
“I’m finding clients sometimes have to go back to their existing lender without the flexibility and power to go to a new lender to negotiate rates because they’re stuck,” said Johnson, a high volume broker in a market marked by its concentration of condo and other rental properties.
Other mortgage brokers also report difficulties, many stemming from CMHC insurance changes, meaning some investors have to come up with a 20 per cent deposit, and from changes to what percentage of rental income lenders will allow clients to use as an offset.
The government`s decision not to raise the CMHC`s cap on portfolio insurance for lenders last month has sped up the banks' retreat from rental mortgages.
Still, Johnson can understand their motivation, suggesting borrowers will have to adjust their expectations.
Those who were downplaying their income to reduce their taxes were likely to be pinged by stricter lending conditions.
“This is a simple case of risk assessment,” he said. “I think moving forward borrowers need to understand that if they have $50,000 on their notice of assessment and they own 10 rental properties, it’s not going to be easy to get them a mortgage.”