Alternative lenders increase share of slowing Canadian mortgage market: CMHC

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OTTAWA — A new report from the Canada Mortgage and Housing Corporation suggests more people are turning to alternative lenders, while the overall number of new mortgages slowed amid government interventions aimed at cooling the housing market.

CMHC estimates alternative lenders held $13 billion to $14 billion of outstanding Canadian mortgages in 2018 — up from $11 billion to $12 billion the year prior and $8 billion to $10 billion in 2016.

Alternative lenders offer shorter-term mortgages, typically between six months and two years, at higher interest rates.

In 2018, their rates ranged between 7.3 and 11 per cent, with an average of 8.99 per cent, compared with the banks, which offered between 3.3 per cent and 5.4 per cent.

The government entity says there were 200 to 300 active alternative lenders in Canada last year and data suggests their prevalence is growing as their share of new, non-bank uninsured mortgages nearly doubled last year.

The report says those who turn to alternative lenders have riskier profiles, including people who are self-employed and investors carrying more than one property. They also have higher delinquency rates than other lenders.

CMHC says 2018 also saw the slowest year-over-year growth in total mortgage debt in more than 25 years as a result of new lending rules, higher borrowing costs and other factors.

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