CIBC World Markets has identified another area of concern for the Canadian housing market in its latest report: the non- or less-regulated lenders offering home loans to consumers.
The CIBC study said these risky lenders occupy 5% of the country’s mortgage market.
"The risk we are facing today is that increased regulations on major financial institutions, combined with even lower
mortgage rates, may work to widen those shadowy margins," CIBC World Markets economist Benjamin Tal said.
"If you are a regulator and you are imposing more and more regulations on those that are regulated, those financial institutions cannot do all the business that they want to do."
Tal said that while 5% is not big enough to shake the entire mortgage sector, this non-prime lending figure may grow.
The Bank of Canada (BoC) also previously expressed worries on such lending practices.
"Low interest rates may not only encourage some households to take on high levels of debt, but they may also encourage some financial entities to lend to riskier borrowers," BoC said in its Financial System Review published in December.
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