From mortgage brokers.ca
Subprime lending is back, with institutional players positioning themselves ahead of the expected spike in B business.
“As at March 31, 2011, we had commitments to make future advances on mortgage loans of $9.2 million,” reads the Q1 financial report Equity Financial Trust, released in May. “We are targeting $100 million in outstanding mortgage loans within the first 12 months of operations and as at the date of this news release, we have funded outstanding loan balances of approximately $7 million.”
New mortgage rule changes ushered in by the federal government starting in April 2010, and most recently this April, will likely bolster revenue for subprime lenders. They are already being blamed for a 14-per cent dip in housing sales last month compared to the year-ago period. Growing numbers of first-time buyers, in particular, have had their homeownership dream frustrated by tougher qualifying terms and reduced amortization terms. The market’s three largest institutional lenders are hoping to win over those prospective buyers and the higher spreads attached to their business.Were these guys in a f'ing coma over the last few years? These type of mortgages along with 0 down and cash back mortgages should be outlawed.
More on subprime lending in Canada and Saskatoon.
Subprime in Canada, the cracks are appearing
Subprime is alive and well in Saskatoon part 3
One thing you should think about (and i wouldn't mind you writing/informing people about) when looking at the bubble in Canada is the type of loans we have. In the US, mortgages with 15 or 30 years are actually the standard. From what I understand the rates on these loans do not change for the full 15 or 30 years. In Canada the 5 year and then variable seem to be the standard types of mortgage.
ReplyDeleteSo while we get a bit cheaper rates with 5 year fixed mortgages than say a 30 year fixed in the US, what will happen if rates rise? In both Canada and the US the new buyers are going to get hammered equally. However, in Canada you are going to have all of these people with existing mortgages suddenly getting whacked with higher rates whether immediately for variable or when their 2,3,4,5 year mortgages come up. In the states it is just those with variable who will get hurt by the higher rates, those with fixed rates are unaffected as the rate is fixed for the full length of the amortization.
Forget about subprime, to me this is the great danger to Canada, both to housing and to the economy at large. In the subprime debacle it was less than 25% of purchasers who were affected, this will affect pretty much all Canadians who own mortgages.
Good choice for a post, it will take a while as I have others I am working on and the long weekend is around the corner.
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