Canadians Run to Alternative Lenders to Avoid New Mortgage Rules
By Patrick LeBlanc @ Real Estate Daily
February 22, 2018

January gave birth to big changes in the Canadian lending and real estate markets. The new mortgage rules in questions carry a higher interest rate and a stricter approval process for applicants. The so-called “stress test” for uninsured buyers has resulted in a 20% increase in rejected applications according to one source.

However, rejected applications aren’t deterring uninsured home buyers. Instead, they’re seeking out alternatives lenders for their mortgages, including credit unions and private lenders, since these lenders aren’t affected by the new mortgage rules. Whether these rules will be good or bad for Canada is yet to see, but we can be sure that they will continue to change how new homebuyers approach real estate.

Key Takeaways

  • Traditional lenders are seeing a 20% increase in rejected applications since implementing the new mortgage rules.
  • Alternative lenders are seeing an influx of high-quality customers as a result of these changes.
  • Some alternative lenders are seeing an 80% increase in new applications.


Mortgage brokers say the borrower rejection rate from large banks and traditional monoline mortgage lenders has gone up as much as 20 per cent after Canada’s banking regulator imposed a new stress test for home buyers who don’t need mortgage insurance.

As a result, alternative lenders are seeing an uptick in business as brokers increasingly direct home buyers toward borrowing options that are beyond the reach of the Office of the Superintendent of Financial Institutions’ newly enacted tighter lending requirements.

Clients who don’t meet the bar are turning to private lenders, mortgage investment corporations (MICs) and credit unions, which are provincially regulated and not required to implement the stress test, said Carmen Campagnaro, president of Pro Funds Mortgages in Burlington, Ont.

The Effect on Alternative Lenders
The higher bar for borrowers is also shifting business to riskier lenders. Harold Gerstel, better known as Harold the Mortgage Closer from his television ads, said his Toronto-based mortgage arm is seeing an influx as well. “We’re definitely getting more business. Whether it’s a substantial change, it’s too early to tell,” he said.

The new rules are sending better quality demand down the credit line, said Robert McLister, a mortgage planner at IntelliMortgage and the founder of

“The demand is shifting down the ladder, so you have these less regulated lenders with higher risk tolerance now seeing materially more business. And they can charge more, and they can be pickier with the types of borrowers that they lend to.”

View the original article at Huffington Post