Buyers adjusting to mortgage stress test

August 16, 2019

Canadian homebuyers are apparently adjusting to the federal mortgage stress test, witnessed by June posting the largest month-over-month increase in mortgage credit growth in two years.
The 5.7 per cent increase from May marked a rebound after a slow down from early in 2017 to mid-2018, according to a Scotiabank report.
“Real estate markets continue to adjust to regulatory changes and are now benefitting from a decline in borrowing rates,” Scotiabank economist Juan Manuel Herrera and research analyst Alena Bystrova wrote in their report, according to Mortgage Broker News.
June 2019 also saw the outstanding balance of national mortgage debt grow 3.7 per cent higher year-over-year, up to $1.57 trillion total.
In their report, Herrera and Bystrova stated that acceleration of borrowing activity in non-bank institutions exceeded that of banks. However, non-bank mortgage credit has yet to significantly exceed the long-term average.
“Despite the faster pace of non-bank borrowing growth, it still occupies less than one quarter of market share,” the duo explained.
At present, non-bank lenders account for 21.3 per cent of the mortgage credit market. Non-bank lenders, including credit unions, are exempt from the mortgage stress test, which requires buyers to qualify at rates at least 2 per cent higher than what is actually available.