Province
TORONTO — High-risk mortgages are spreading like wildfire in Canada, new data show, but the country is not in danger of a U.S.-style overexposure — at least not yet.
Non-conventional mortgages — loans at high rates to homeowners who do not qualify for standard mortgages — are growing by about 50 per cent a year, research by CIBC World Markets shows.
That’s almost five times faster than the growth of traditional mortgages, and this is a sign of things to come.
In the last year, about 85,000 Canadian households have taken on non-standard mortgages, CIBC estimates.
They are most popular in rural and Atlantic Canada.
“Over the next five to 10 years, innovation in the mortgage market will accelerate at a pace not seen before in Canada,” says CIBC economist Benjamin Tal. “The genie is out of the bottle.” But that doesn’t mean that Canada’s homeowners are drowning in debt or about to be seriously sideswiped by a slowing economy, like many economists are projecting for the U.S., Tal argues.
For now, Canada’s mortgage market is a far cry from its U.S. counterpart, where non-conventional mortgages make up about 20 per cent of the market. In Canada, it’s about five per cent, Tal estimates.
As well, Canada’s big banks have not fully embraced the non-conventional mortgage market the way U.S. players have, and Canada does not have the proliferation of mortgage brokers that are a driving force in pushing riskier mortgages in the U.S., he adds.
© The Vancouver Province 2006