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Mortgage business on the move

In an effort to fill in some of the gaps in the country’s housing market data Canada Mortgage and Housing Corporation has launched a new Residential Mortgage Industry report. The agency says the report is designed to support “evidence-based policy and informed decision making within the housing finance sector.”

Not surprisingly the report confirms that Canada’s big banks have the vast majority of the country’s residential mortgage business with a 75% share. The average mortgage is a little less than $221,000 and their delinquency rate is just 0.24%.

Credit Unions hold 14% of the market, with an average mortgage value of $151,000 and a delinquency rate of 0.17%. Mortgage finance companies have 6% of the market, an average mortgage of $258,000 and a delinquency rate of 0.25%.

So called “alternative lenders” – mortgage investment companies (MIC) and private lenders – have a market share of just 1.0%, an average mortgage of $195,000 and a delinquency rate of 1.93%.

While the alternative lenders have the smallest slice of the pie many market watchers are concerned that their share is growing while overall mortgage origination have declined.

In 2018 the growth of mortgage originations hit its lowest level in 25 years. At the same time mortgage investment companies (MICs) increased their share of originations, more than doubling their share of the mortgage stock.

Overall, 200 to 300 active MICs and private lenders held an estimated $13 billion to $14 billion of mortgages outstanding, up from $12 billion estimated for 2017 and $10 billion in 2016.

Tougher mortgage stress testing is seen as a key reason home buyers are moving to alternative lenders where the terms are easier, but more expensive. CMHC says a culture shift from owning to renting helps explain the drop in mortgage originations. Of course, that shift is likely a response to the tougher mortgage qualifying rules as well.