A report by CIBC World Markets said the overall mortgage market share of alternative lending institutions in Canada has increased from 0.8% during 2008 to 2009, and its expansion rate is also growing at 25% per year.
Deputy chief economist Benjamin Tal credits this growth to stricter bank regulations which lead more Canadians to hunt mortgages in non-traditional lenders. The current total market share of the sector is 2.2%, a figure too small to pose an economic threat.
"We don't want to kill this market because it's a market that is part of a healthy system," he said.
"We just have to make sure that it's not being abused."
Tal said the time to worry is if the alternative lending community starts to occupy 5% market share.
A broker from Mortgage Group in Edmonton shares Tal’s sentiment.
Jason Scott said alternative lenders “provide options for a range of potential borrowers, from people saddled with wobbly credit, to the recently divorced, to the self-employed who draw a smaller income from their business for tax purposes.”
Scott added that about 10% of his clients get mortgages from alternative lenders which are sometimes called "B-lenders" or "C-lenders."
"There's a growing segment of the population where it's harder for them to get qualified with A-lenders," he said. "So, we need these alternative lenders to provide solutions while we're getting them into a position where they can then go back and get the best rates."
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