Changes in Mortgage Rules May Lead to Factory Lending

Share Article

Marcus Arkan, a mortgage expert and CTO of Syndicate Mortgages, talks about the implications of the changes in Canadian housing and mortgage rules on credit unions and their existing customers

Ottawa, Ontario - The recent amendments in Canadian housing and mortgage rules have not left anyone unaffected. The home sellers will be affected with a reduced demand for homes. In addition, the buyers will have to face increased prices of homes and increased costs of mortgages. Both of these combined will slow down the housing and mortgage market leading to a slower economic growth.

The reduction in the amortization period of mortgages from 30 years to 25 years has led to an increase in the overall costs of mortgage. The monthly mortgage costs and total interest costs have increased significantly making it more unaffordable for individuals to undertake mortgage loans and hence purchase homes.

Some of the amended mortgage rules announced by Ottawa, particularly, will be detrimental for credit unions and their customers alike. According to the Credit Union Central of Canada (CUCC), the rules imposed by the Federal Government will eventually promote commoditization of mortgages, leaving them undifferentiated, and will not allow for lending characterized by lower risks. Therefore, it can be said that the rules of Ottawa will consequently lead to factory lending.

The amended lending rules imposed by the government would impact the credit union’s ability to lend to individuals who may not be income rich but possess sufficient equity or assets. This eventually would reduce the risk of payment default on part of the borrower or consumer. The individuals who have lower income and sufficient assets at their disposal are often the wealthy seniors of the society and owners of small businesses who have the ability to benefit from tax advantages on their incomes. Nevertheless, they are sufficiently capable of servicing significant home mortgage loans.

Marcus Arkan, CTO of Syndicate Mortgage and a mortgage expert elaborates further, “The direction of the rules imposed by the federal government can be risky for the credit union system as it favors factory lending to some extent. The changes in the housing and mortgage rules have increased regulatory oversight which may lead to further commoditization of mortgages or other loan products. This will eventually damage the long standing practices of the credit union of lending on the basis of intangible information”.

To know more about the current mortgages being offered, visit the Syndicate Mortgages website.

About Syndicate Mortgages Inc.
Syndicate Mortgages Inc. is one of the leading Canadian mortgage brokerage firms. Founded in 2008 in Ontario, the company specializes in residential, commercial and construction financing across Canada. With years of experience and expertise in the mortgage industry, and access to an array of lending institutions across Canada, Syndicate is known for finding the best mortgage rates for their customers. Syndicate has branch locations across Canada. For contact, please use the following details.

Contact Details
Syndicate Mortgages Inc.
Toll Free: (888) 646-1062
Email: info(at)smibroker(dot)com

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Marcus Arkan
Follow us on