CANADA’S BANKS TIGHTEN MORTGAGE MARKET GRIP
Canada’s biggest banks are tightening their grip over the country’s $1.5-trillion mortgage market as new rules designed to cut out risky lending make it harder for borrowers to switch lenders.
The rules, which stress-test borrowers’ ability to make repayments at 200 basis points above their contracted rates, had been expected to hurt profitability at the banks’ domestic businesses by resulting in them turning away more customers.
However, the country’s biggest five banks, which account for about two-thirds of the Canadian mortgage market, are reporting higher rates of renewals by existing customers concerned they will not qualify for a mortgage with another bank.
The rules, known as B-20 and introduced in January, do not apply when borrowers are renewing mortgages with their current lender, creating an uneven playing field.
“B-20 has created higher renewal rates for the big banks, driving volumes and goosing their growth rates,” said Eight Capital analyst Steve Theriault. “It’s had the unintended consequence of reducing competition.”