04 May
The last two years have made mortgage professionals realise the uncertainty and the unpredictability of the mortgage industry when faced with unknown circumstances or faced with a lengthy pandemic. However, although the recent pandemic halted the business activities of many organisations, mortgage activity continued to flourish because interest rates were dropped to a historically low level.
Because of the historically low interest rate levels, the demand for housing gradually increased while the supply remained limited. This also caused the housing prices to increase at an exponential level resulting in average houses being sold or bought at a price of more than $1 million.
Since these external factors have determined the direction of Canadian housing market, the mortgage industry has also updated its regulations by increasing interest rates and have made it more difficult to pass mortgage stress tests so that a smaller number of borrowers are able to qualify for a traditional mortgage.
This has led to an increase in borrowers moving towards alternative lending solutions as they provide greater ease for borrowers to qualify for a mortgage. Furthermore, there are different types of alternative lenders who are flexible with borrowers who belong to different income groups and there are lenders who base the majority of their lending criteria on the property itself.
Even borrowers who have a bruised credit history can look towards alternative lenders for additional funds for a home purchase or home renovations, albeit they would be paying a higher interest rate as compared to traditional lending.
In addition, alternative lenders are always making significant efforts to ensure that they follow current market trends that are affecting the lending space. More and more lenders are focusing on the technological aspect of the lending space and are developing websites and solutions that streamline the relationship between the broker and the lender. Moreover, by improving the technological aspect of lending space, alternative lenders can incorporate further effectiveness and efficiency into their business processes.
It is also important to consider that alternative lenders are greatly focusing on how the changing interest rate environment may play out in the lending space as the year progresses. However, a bottoming-out of the housing market is probably not in the cards. Lindberg asserted, “I think that we will continue to see the market remain stable with the values; we may even see an uptick in this. Low inventory will still be a theme in 2022.”. Giacomini also agreed with the notion saying, “I think as rates go up, I see more of a [market] flattening. There might be some corrections in some markets. But for the most part, I just see that curve flattening.”.
