Mortgages to New Owners Drops Across Canada

new mortgages

The housing market remains hot in places like the Greater Toronto Area. While this is great news for those who own homes, it is making it difficult for those looking to get onto the property ladder. In fact, higher housing prices coupled with stricter lending rules means more potential homebuyers are left sitting on the sidelines.

According to the Canada Mortgage and Housing Corporation (CMHC), the number of mortgages to new owners declined sharply last year. Over all, the number of mortgages to new owners fell 6.5% year-over-year.


New Mortgage Rules Make It Harder to Qualify

Economists are blaming the reduction in new mortgages on new mortgage rules introduced in 2016. All mortgages with less than a 20% down payment must qualify at the greater of either their contracted mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate.

Not only does this make it tougher for first-time homebuyers to get onto the property ladder, it decreases the borrowing power of those looking for a new mortgage. The new rules also decreased consumer’s ability to fund second or third mortgages.

Thanks to rising household debt levels and tougher mortgage rules, it is expected that the number of mortgages to new owners will decline even further in 2018. Especially when you consider how strong the Canadian housing market is.

Canadians Are Seeking Alternative Solutions

While the number of loans from traditional lenders may be on the decline, the volume of loans from private lenders is at record levels. Why? Because private lenders have less stringent rules, meaning homebuyers who were priced out of the market by the big banks may still qualify with private lenders. It shouldn’t be a total surprise then to learn that more and more Canadians are turning to private lenders to secure a mortgage. In fact, the number of Canadians looking for private mortgages has doubled since 2015.

The fact is, alternative lenders play an important role in Canada’s real estate market as potential homebuyers, shut out of the housing market by the country’s big banks, look for financing elsewhere and investors look for higher yields.

Mortgage Company of Canada: An Alternative to the Traditional Mortgage

Mortgage Company of Canada is a Mortgage Investment Corporation (MIC) and private lender that specializes in lending to specific sectors of the mortgage market, historically those underserviced by private and institutional lenders in terms of loan type, amount, and geographic location.

MICs have been called the best investment in the world for many reasons. Because of their corporate structure, they do not pay income tax and are legally mandated to distribute all their earnings to investors. On top of that, as an alternative investment strategy, MICs are designed to generate positive returns no matter what the broader market is doing, even when the equity markets are underperforming.

When it comes to investing, Canadian are seriously underexposed to real estate as an investment class. The best way for investors to gain direct exposure to Canada’s mortgage market is through a MIC. Owning shares in a MIC allows you to invest in a company that manages a diversified pool of residential and commercial mortgages.

Case in point, the annual yield target at Mortgage Company of Canada is 9.25%, with distributions paid monthly. Between 2000 and 2015, the average dividend yield on the TSX was 2.39%, distributed quarterly. The S&P/TSX Composite Dividend Index has a one-year annual return of 5.38%.

How does Mortgage Company of Canada do it? Our management team has demonstrated an excellent track record over a combined 45 years of lending experience. That leadership currently manages over 700 mortgages in the GTA.

Moreover, Mortgage Company of Canada is committed to best practices and the preservation of shareholder capital. Accordingly, we have appointed four well respected business and finance professionals with public company experience as independent members and strategic advisor to our Board of Directors.

To find out how you can diversify your investment portfolio with Canadian real estate, visit our web site or contact Mortgage Company of Canada at 1-866-318-7222.