In its latest Financial System Review, the Bank of Canada has cautioned that growth prospects for Toronto’s private mortgage segment are now limited, even as lending volume remains stable and the sector’s market share has noticeably increased since 2017.
The BoC said last week that while private lending’s market share has grown to nearly 8% of new mortgages in the GTA, the development can be attributed more to the fact that the big six banks have slowed down in their lending. Private mortgages volume stood at slightly over $2 billion per quarter.
“This (market) share overstates the importance of private lenders, however, because their loans have shorter terms compared with those of other lenders,” the BoC stated in the Review, as quoted by Reuters.
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The central bank stressed that under the current conditions, authorities must take a closer look at the movement of mortgage lending from Canada’s largest institutions. The BoC also said that it is waiting for Q2 data to expand its understanding of this migration.
“This could make the [tighter qualification rules] less effective in mitigating the vulnerability for the financial system as a whole.”
The bank urged private lenders to expand their sources of funding, improve their operational capabilities, and further develop their lending channels to stimulate greater activity in their sector.