Credit unions, private lenders on the rise amid rate increases

Consumers seek the elbow room that these lender types provide

Credit unions, private lenders on the rise amid rate increases

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.

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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%.”