Household Lending Tightened Due to New Mortgage Rules

New mortgage rules made household lending a bit trickier for the first quarter of 2018, shared Bank of Canada. This development regarding the OSFI mortgage stress test that started in January led to more Canadians going to loan sharks and to private lenders because they can’t qualify for a bank mortgage.

Survey Results

A survey by the Bank of Canada’s financial institutions showed that the tighter household lending conditions for the first quarter of 2018 is linked to the new mortgage rules. The survey usually just report on business loans but have recently included household lending.

The Bank of Canada added that the tightening in mortgage lending resulted from changes to Guideline B-20 (about the underwriting standards) which primarily affected non-price conditions for HELOCs (home equity lines of credit) and low-ratio mortgages. The tightening also affected price conditions for mortgages because the spreads charged to borrowers increased together with mortgage rates.

These developments may be a preview of what other changes will take place. Canada’s biggest lenders are saying that it is still too early to tell what other impacts are in store, a sentiment shared by Dave McKay, president and chief executive officer of the Royal Bank of Canada.

HELOC on the Rise?

The Bank of Canada’s survey shared that the demand for low-ratio mortgages and HELOCs experienced an increase during the survey period. It should be noted that the new B-20 rules regarding having a stress test for uninsured mortgages may also affect low-ratio mortgages because they fit the criteria for uninsured loans.

The survey also shared that there are increases and decreased in demand affected by regulatory changes that were reported by institutions. The figures could have been due to expectations of higher interest rates as well as borrowers having placed an application prior to the implementation of the B-20 changes. These are about the same findings reported in March in connection with the Bank of Canada’s rate-setting decision wherein people pushed to pull forward before the implementation of new mortgage guidelines and other related policies.

The BOC said that the survey respondents also expect that the current quarter will reflect a decreased demand for HELOCs and low-ratio mortgages. It noted that the demand for such tailed off after regulatory changes were introduced late 2016.

Business Lending Developments

The survey found that overall business lending conditions eased slightly during the surveyed period. This was driven by increasingly intense competition for corporate borrowers as the demand for business credit increased in the survey period.

The questions used for the business lending and the household lending portions of the survey reflect each other and the respondents were 18 financial institutions. They were asked about their lending practices, demand for credit, as well as changes noted from the prior quarter.

Not sure about how the developments shared will affect your existing mortgage or plan to apply for a new one? Contact us at Mortgage Central Canada and our professional mortgage brokers would be happy to assist you with your mortgage concerns regarding the latest mortgage news.


Ontario Tightens Rules Against Double-Ending by Real Estate Agents

A fine that can go as high as $50,000 awaits real estate agents who engage in unethical double-ending. Double-ending is when brokers, salespersons, and brokerages push through a real estate deal while representing more than one party in the deal.

When Interests Are Conflicted

Regulatory changes are being introduced by Ontario to address scenarios wherein real estate agents are representing both sides of a real estate sale, truly a conflict of interests. It is to be noted that although Ontario is getting stricter on the practice of double-ending, this move did not go into banning the practice.

The changes were announced at Queen’s Park by Minister of Government and Consumer Affairs Tracy MacCharles. The announcement means that those brokerages, salespersons, and brokers who are representing more than one side at a sale will now be subject to stricter rules.

The proposed legislation is also raising the fines for those who violate the code of ethics of the real estate industry. The new fines are up to $100,000 for brokerages and around $25,000 to $50,000 for individual brokers and salespersons.

The Media Brought Light Into the Issue

MacCharles told reporters that what the government is doing is a response to an issue that’s been circulating in the press, wherein one agent is representing both sides in a transaction. She added that they won’t be banning double-ending, but will put a limit to the situations that it’s acceptable to take place.

MacCharles mentioned certain situations such as in some locations wherein there are very few agents, a family situation, or in some industrial or commercial situation where the expertise and representation of a real estate professional is needed – are good examples where double-ending is allowed.

It was also mentioned that the ideal situation is still wherein a seller and a buyer would have different representatives as what is referred to in the industry as the ‘designated representation model’.

​MacCharles further shared that the disciplinary actions against those who choose to not comply with the new rules will be up to the Real Estate Council of Ontario.

Double-ending is a real problem as was uncovered in an undercover investigation made by CBC’s Marketplace. Their investigation revealed that some Toronto real estate agents are offering unfair advantages to potential clients in an attempt to secure a deal from both ends.

Big Changes Ahead

The new rules include disclosing to clients when double-ending occurs, a move applauded by Ontario Real Estate Association CEO Tim Hudak, who believes that this is a big step towards the right direction and allows for more trust and better business practices. Other real estate experts have a neutral stance on the issue but acknowledged that full disclosure would be best, more so for sellers who bought from the same agent and want to sell their home with the help of someone they already know and trust.

Concerned about getting the best deal that will work for you when refinancing your mortgage, applying for a second mortgage or a home equity loan? Let us help you! Contact us today!