Consumers seek the elbow room that these lender types provide
Canadian home buyers are increasingly considering non-standard channels like credit unions and private lenders amid rising mortgage rates, according to industry players.
A major impetus of this shift is that “we’ve been accustomed to really low rates for a long time and probably for the last 10 years they’ve been under 4%,” said Chantal Driscoll, a Burlington-based broker with RDM Financial Consultants.
Considering the current environment, a growing number of consumers might “go to... credit unions or private lenders to qualify a little more than what they’d qualify for with the bank,” Driscoll told The Canadian Press.
This is despite credit unions and private lenders accounting for just 3.7% of Canada’s mortgage origination activity in 2021 and about 6.7% so far this year, data from Ratesdotca showed.
Toronto-based broker Sung Lee said that non-bank lenders offer much-needed elbow room that many consumers require in this financial climate.
“If a client’s looking for a five-year, fixed rate mortgage, they’re now qualifying (with traditional lenders) at say 6% or 6.5%, which really reduces the total amount that they could qualify for,” Lee said. “With credit unions, they offer more flexibility, where you could qualify at just your five-year contract rate or in some cases, if it’s a variable, like a contract (rate) plus 1%.”