Homeowners struggling to qualify for mortgages because their income-to-debt ratio or credit rating are increasingly relying on riskier loans from non-traditional lenders
to finance their homes is causing concern in Ontario’s mortgage industry, and the province’s financial regulator says it expects reliance on such high-interest loans to increase.
He called the intense growth of private mortgages “a tragedy,” because buyers feel pressure to use these riskier loans both when demand is high and they bid outside their budget, and also when demand is low but increasing interest rates make payments unaffordable. “Most of the time private mortgages are intended to be a short-term measure that buys time for consumers to get their finances back in order so they can qualify for traditional mortgages,” said Ms. Leung, who said people need to understand why they didn’t qualify for traditional mortgages and have an exit plan.
“If they tighten it even more, you can’t stop the debt that already exists out there for consumers, and if they can’t qualify at a major institution, they might be put into a position where the only choice is private lending at that point,” Ms. Hinojosa said.
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