Reuters via yahoo finance | Nichola Saminather | Sep 7, 2022

TORONTO (Reuters) – In a country where the Big Six banks control 80% mortgage market share, Canada’s smaller lenders are making some rare headway after the Bank of Canada’s sudden and sharp interest rate increases this year raised the bar to qualify for home loans.  The Bank of Canada has so far this year increased rates by 300 basis points, including Wednesday’s 75 basis-point hike. That has lifted the minimum qualifying rate for the biggest banks’ mortgages, set by regulator OSFI, reducing the amounts borrowers can access and leading some of them to seek alternatives.

• Credit unions’ mortgage balances increased 4.1% between March 31 and June 30 [compares with 2.6% growth at the Big Six banks].  That’s good news for credit unions, which hold 14% of outstanding Canadian mortgages.
• Most credit unions can take into account factors that the big banks may not consider, including variable income for self-employed borrowers and those who have stable income now but may have a limited or checkered credit history, said Michael Hatch, vice president, government relations, at the credit union association.

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Pippa Nutt, chief marketing and member solutions officer at DUCA Financial:

We’re seeing a lot more rate shoppers, so we’re seeing a lot more inquiries, which has seen a 300% increase in loan growth in June from the previous year, and 27% from the prior month.

Mark Ostland, director, mobile experience, at Meridian Credit Union:

We’re certainly seeing more people come over saying, ‘I’m good, I’m OK, but I failed the stress test’.  Their financial profile may (still) be strong.

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The Canadian Press via Global News | Sep 7, 2022

Image: Unsplash/Alice Pasquale

Rising interest rates, high household debt to spur ‘payment shock’ for Canadians

Canadians are increasingly vulnerable to “payment shock” as higher household debt levels collide with oversized interest rate hikes.

• Another major rate hike: The Bank of Canada raised its key lending rate by three-quarters of a percentage point Wednesday, making it more expensive to borrow money in a time of climbing debt.
• Climbing consumer debt:  Equifax said total consumer debt climbed 8.2 per cent in the second quarter of 2022 compared with the same quarter last year.  TransUnion’s latest credit industry report said total debt grew to an all-time high at $2.24 trillion, up 9.2 per cent from the same time in 2021 and up 16.4 per cent from pre-pandemic levels at the end of 2019.

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• Relying on cards, loans, and feeling the pressure: It’s a situation experts say could push some to a breaking point as they rely on higher interest rate loans and credit cards to pay for the soaring cost of everyday essentials.
  • Wes Cowan, a licensed insolvency trustee and senior vice-president at MNP Ltd., says people are increasingly using credit cards and loans to make ends meet. He says given growing debt levels and escalating interest rates, he expects to see more people struggle to make minimum debt servicing payments in the coming months.

“Anything that has a variable rate attached to it, like the lines of credit, we’re going to see a huge payment shock,” he says. “Everything is more expensive — buying groceries, heating your home, the basics — and now servicing your debt will cost more too.”

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