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Free AccessMNI DATA IMPACT: Canada Nonbank Mortgage Share Up in Lockdown
Canada's nonbank lenders boosted their share of the mortgage market during the spring Covid lockdown as demand for bigger properties grew, government figures showed Thursday, extending risks to the financial system from a long housing boom.
Those financial institutions backed 14.5% of the total value of mortgages in the second quarter, up from 10.6% in the first quarter, Statistics Canada said. Nonbank mortgages also accounted for 11.4% of the number of loans, up from 8.4%. Much of the country was in a severe lockdown in the second quarter to curb Covid-19, and housing showed unexpected strength as people fled downtown condos for bigger suburban properties, fueled in part by rock-bottom interest rates.
Regulators have fended off questions about whether macroprudential policies imposed on major federally-regulated banks would simply drive riskier borrowers to less-stringent lenders. Surging home prices in Toronto and Vancouver and a rise in the number of borrowers taking on debts exceeding 450% of income while the Bank of Canada set record low rates have prompted government curbs, such as an interest-rate stress test. The BOC said last month the risk of a wave of consumer defaults remains low.
Nonbank mortgage lending grew 36.5% in the second quarter to CAD47.9 billion, Statistics Canada said Thursday, faster than the 25.4% pace set in the same period a year earlier.
MORE PRONOUNCED SECOND HALF
Federal regulators allowed major banks earlier this year to offer mortgage deferrals, and nonbank lenders followed suit with about 100,000 deferrals in the second quarter, or 5.9% of the number of loans. Canada's major banks through October have offered deferrals to 16% of their mortgage clients, or about 796,000 of them.
Nonbank mortgages that were more than 90 days in arrears grew 11.5% to about 4,400 in the second quarter as the job market weakened, for a total of CAD1.1 billion. The 0.26% arrears rate for the second quarter is equal to the rate major banks reported for May.
"With physical distancing measures and relief measures still in place at the time of this release, the economic effects on mortgage lending are expected to be more pronounced in the second half of 2020 and into 2021," StatsCan's report said.
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