A new report from Canada Mortgage and Housing Corp. (CMHC) showed that unregulated mortgage finance companies (MFCs) are driving the number of residential mortgages higher, according to Calgary Sun.
It was noted that this connotes Canadians’ willingness to make the most of available options in order to get their hands on mortgages. Further, it was found that the preferred financial institution depends on the age of the person applying for a mortgage.
Acknowledging the fact that the government currently permits “expansion of credit unions” outside their provincial markets, the research aimed to “provide a greater level of understanding of the risks and impacts stemming from credit union and MFC business models and activities in the Canadian mortgage market.”
It was then highlighted that 91% of outstanding credit was represented by chartered banks, credit unions, and MFCs.
“MFCs have a disproportionate volume of younger home buyers, largely driven through mortgage brokers, and credit unions have historically served older home buyers and small business owners,” explained by Calgary Sun.
Meanwhile, CMHC also expounded on the effects of this phenomenon on the housing industry. It said: “Presently, both MFCs and credit unions present minimal risk to the Canadian mortgage market. As these organizations continue to modernize and adjust to new market conditions and regulations, CMHC will continue to monitor their impact and risk.”
Other generated insights include credit unions likely having the local market expertise that paves the way for the extension of mortgages to borrowers who are seen to be carrying greater risk by other lenders. Moreover, the report confirmed that MFCs and credit unions were not contributing to the risk in the mortgage market. Lastly, MFCs’ ability to compete and serve certain segments of the market has been minimized after the 2016 regulatory changes were implemented. This was particularly evident in homeowners refinancing and home buyers looking for properties that cost over $1 million.
Notably, most of the aforementioned results were based on activities in 2016.