Some experts harbour the opinion that the Canadian mortgage market may face a significant slowdown in 2018 – perhaps bringing with it price relief for buyers in the hot housing markets like Vancouver and Toronto. And, they add, rising interest rates aren’t the only culprit.
New proposals for tighter mortgage underwriting standards (B-20 guidelines) from the Office of the Superintendent of Financial Institutions (OSFI) could lead to a 5% to 10% decline in uninsured mortgage origination volumes, and even sharper pullbacks for the alternative lenders.
The proposed changes unveiled by OSFI on July 6, would require stress tests to qualify for all uninsured mortgages (roughly 80% of the market), and would make the qualifying rate for these mortgages the contract rate plus two percentage points.
While industry feedback suggests an overall volume decline in the 5% to 10% range, at least one industry watcher noted that alternative lenders are the most sensitive to such changes and could therefore see volumes fall approximately 15% to 20%.
The analyst highlighted Equitable Group Inc. and Home Capital Group Inc. as the most sensitive to potentially lower volumes stemming from stricter underwriting standards.
Since Genworth MI Canada Inc. and First National Financial Corp. are more focused on insured mortgages, the analyst doesn’t anticipate the proposed changes will directly impact their business, and could make it more affordable for first-time home buyers if prices decline.
Atrium Mortgage Investment Corp. is another potential beneficiary, as he noted it could boost its market share in the single family home segment, as the company is not regulated by OSFI.
The analyst’s top picks remain Equitable Group and Genworth MI Canada Inc.
