Recent analyses by the Bank of Canada have found that alternative lenders now account for approximately 8% of all mortgages nationwide, with the segment’s share of the market virtually doubling since 2015.
The tighter mortgage qualification requirements introduced by the B-20 guidelines have been cited as a leading factor in this development, and this has become especially apparent in Ottawa, where prices have grown by an average of nearly 15% from 2016 to 2018.
While B-20 was implemented to help cool down the inflamed situation in markets like Toronto and Vancouver, this actually had the unintended effect of pushing a considerable number of prospective buyers out of the market due to a larger volume of rejections from traditional lenders.
Enter entities like the Ottawa-based firm Advanced Mortgage Investment Corp., of which Michael Hapke is a founding partner.
“We turn down more, but all of the good stuff that all of the rule changes have left behind is where we really step in and earn our keep, so to speak,” Hapke told the Ottawa Business Journal.
“These mortgage rule changes have made it more difficult, and what we’re seeing on the private lending side is the quality of business that is coming over to us is second to none. It’s fantastic.”
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Other options that Ottawans are using include cooperating with friends for the payment and using funds from parents or willing relatives.
Local broker Chris Allard noted having observed a “significant” increase in the number clients who have either received funds from, or co-signed applications with, friends or relatives.
“If there’s an option at all for parents or family members to gift funds or to co-sign, they will take that option before choosing to pay a higher mortgage interest rate,” Allard said.
The average home price in Ottawa stood at $433,500 as of December 2018, making it one of the fastest-growing markets nationwide in terms of pricing.
“If you build a wall, you’ll figure out how to go over it, under it or around it,” Hapke stated.