Credit unions that offer homebuyers way around stress tests set to grow via financialpost
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“Speaking with at some of these credit unions, the message is that they’ve seen considerable growth in products like contract-rate qualification mortgages,” McLister said. “But that growth is coming off a small base because it’s a small market to begin with.” Most credit unions in Canada are regulated in a distinct provincial and territorial system parallel to Canada’s big banks. There is much alignment, but also regional differences including the amount of deposit insurance on chequing and savings accounts. In 2012, the federal government paved the way for credit unions to expand beyond provincial borders to become federal financial institutions, but there was very little uptake.
Like all the credit union’s lending programs, such loans are extended based on a “holistic and prudent review” including assessing a customer’s cash flow and borrowing capacity, she added.Meridianprospective buyers on its website that, as a credit union, it is “more flexible than banks when it comes to approving mortgages” and can help those who wouldn’t pass the federal stress test buy their dream homes by taking “income appreciation” and accelerated payment options into account.
The credit unions’ gains were achieved even as the number of homes bought and sold was falling. Transactions in July, for example, came in 29.3 per cent below activity in July 2021, according to the Canadian Real Estate Association . Sales were down in roughly three-quarters of all local markets, led by large cities and their surrounding areas including Toronto, Vancouver and Calgary.
His ballpark estimate that the size of the market is in the hundreds of millions of dollars, which he called “conservative,” is based on total annual mortgage originations at credit unions and the percentage of volume coming from contract-rate qualification mortgages, as extrapolated from data at a sample of credit unions. Though it’s a considerable amount of money, he noted that it represents a small corner of the roughly $450 billion in new mortgages underwritten each year.
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