Alternative lenders fill void left by big banks

Pressure on Canada’s big banks from Ottawa and the Bank of Canada to tighten mortgage lending standards is benefiting the country’s alternative lenders.

One of those, Equitable Trust, has even been able to realize its goal of coast-to-coast mortgage lending. On Thursday, Equitable ventured into Nova Scotia with plans to provide single-family residential mortgages.

“They are filling the void left by the Big Six banks,” said Shubha Khan, an analyst at National Bank Financial.

He said the country’s largest lenders have “reduced lending to self-employed borrowers and lending through the mortgage broker channel due to reduced availability of mortgage insurance from CMHC and increased regulatory scrutiny from OSFI, among other things.”

Ottawa has taken a number of steps this year to slow what it believes is an overheated housing market. In April, the federal government made the Canada Mortgage and Housing Corp., a key component of Canada’s mortgage market, subject to direct regulatory oversight by the Office of the Superintendent of Financial Institutions.