Toronto condo market report: Introduction
The subprime lending industry is alive and well in Canada; that is the subject of this Toronto condo market report. In fact, subprime lenders hold almost 8% of Canadian mortgages, which is a hefty 37.8% increase compared to the same quarter last year. And, this is the sixth consecutive quarter we saw the subprime lending industry grow. It’s now at its highest level in 10 years. Although many pundits blame the spike in prime lending to the new mortgage stress tests, it’s clear that this trend began years before stress testing was introduced.
Toronto condo market report: What are subprime loans and how do you get one?
- Any loans that are for borrowers that do not have a good credit score
- They’re done through private lenders, typically accessed through a mortgage broker
- Private lenders are not federally regulated like the banking industry
- Private lenders charge steep prices
Toronto condo market report: Why do people take subprime loans?
You may be asking why anyone would take a subprime loan and pay considerably more money than they would at a bank.
- Transunion estimates that 11.9% of the 28.4 million Canadian consumers with credit profiles are subprime which means that they wouldn’t qualify for a mortgage from the bank
- A borrower with excellent credit might resort to a subprime loan because the bank won’t lend them as much money as they need
- Even a person with bad credit or no credit, there is a private lender willing to give a subprime loan
Toronto condo market report: How is subprime lending affecting Toronto’s condo market?
For some reason known only to the government, they don’t track subprime lending. CIBC Economics show that over:
- 1 in 10 Toronto condos registered in 2017 was attached to astronomically high mortgage rates
- 17.4% of owner-occupied condos registered in 2017 had a mortgage rate above 9%
- 16.2% of condo investors with units that registered last year were paying more than 9%
Toronto condo market report: What’s going to happen if the market starts to soften?
The problem with paying astronomically high-interest rates is what’s going to happen if the market starts to soften? How will these condo owners with subprime loans get their money out, let alone make a profit?
The mortgage stress tests are in place for a very good reason. To ensure that Canadians don’t buy houses or condos that they can’t afford. Trying to avoid the system by going to private lenders and paying high-interest rates can put you in a financial danger zone.
Toronto condo market report: Are you in a financial bind?
If you’re in a financial bind because you’re living in a property that you can’t afford, or for any reason, you need professional help now. With a cumulative 50+ years of experience, the Ira Smith Team has helped people just like you who are facing a financial crisis. Give us a call today. We can help you overcome your financial difficulties Starting Over, Starting Now.