The Bank of Canada announced 10% of Canadians will not qualify for conventional mortgages next year, but, according to one mortgage broker, solutions could be just around the corner.
The Bank of Canada conceded that disqualified buyers will likely taper their expectations and buy smaller homes, or go through the private channel. Others will simply wait and buy when they have more money saved for their down payments.
But Frances Hinojosa, a mortgage broker and managing partner at Tribe Financial, says the sky isn’t falling because lenders are cooking up new products and solutions for brokers to offer their clients.
“We don’t know what products and programs are going to be implemented in 2018 to ensure Canadians still have access to mortgage products and solutions to fulfill their financing needs,” she said. “A lot of lenders are looking at a suite of products to see that they fill the gaps with the new rule changes. We don’t know what products and programs they’ll offer.”
Hinojosa ultimately thinks that home purchasers will find ways around the new rules, courtesy of industrious lenders and brokers, but she doesn’t think B20 is necessarily a bad thing.
“I’m very confident there will be solutions that will be implemented to fill the gaps,” she continued. “Ultimately, my stance on these rule changes is they’re there to prevent the few from the many by creating unaffordable mortgages. Sometimes we have to take a step back and say, ‘Can this client afford this mortgage?’”
Some buyers will doubtless go the riskier private lending route, but Hinojosa doesn’t think the government is exposing homebuyers to elevated risk by reducing their mortgage options. For one, she thinks it’s only a matter of time before the private channel gets regulated the same way insurable and uninsurable mortgages were.
“Sometimes we’ll have to say, as brokers, ‘no’ to consumers who don’t fit the financial profile,” she said. “Private and alternative mortgages are not scary in my mind and they’re not bad. A lot of them out there provide good solutions for clients, but as mortgage professionals we have to make sure the cash flow meets clients’ needs. The interest rate for the client doesn’t make them uncomfortable; it’s the cash flow, because that’s what comes out of their account every month.”
One solution that’s been talked about for homebuyers unable to qualify with ease next year is longer amortization periods, but Jeff Spencer, vice president of retail sales and distribution with Manulife Bank, isn’t so sure that option will even be on the table because it isn’t wise to draw the ire of regulators.
“It will depend on the stance that various lenders take,” he said. “I’m not sure the majority of lenders will want to circumvent these new rules because it doesn’t exactly help their relationship with regulators. I’ve heard about longer amortizations from a number of people, but I’m not sure any of the various lenders will take that approach or not.”
How will private channel fare in 2018?
Diversity will be key in 2018