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Alternative market share hits record highs

by Justin da Rosa | Mortgage Broker News | 19 Dec 2014

Alternative lenders’ market share has grown to record levels in 2014, according to new data from one major bank.

Alt-A lenders now underwrite 2.2 per cent of all Canadian mortgages, according to CIBC World Markets, who released the data to the Financial Post.

According to the report – which was based on Statistics Canada data – the value of loans underwritten by alternative lenders grew by a staggering 25 per cent over the past 12 months. The overall mortgage market grew by a mere four per cent over the same period. Much of this growth is due to an increase in subprime lending.

Speaking to the Post, Benjamin Tal, deputy chief economist for CIBC, assuaged fears that this sort of subprime lending is similar to the types of loans that were blamed as a major contributor to the economic downturn in the United States.

“Subprime can be someone like a plumber,” he told the Post, referring to business for self clients. “You should also remember that subprime is a normal part of a healthy functioning market. The U.S. was able to function with five per cent of the market [in subprime loans] for 40 years with no problem, [but] when it goes to 33 per cent, that’s a problem.”

Brokers are increasingly relying on alternative deals, which are major contributors to the subprime market, and several monoline lenders have begun to more heavily focus on the alt-A lending.

b2b bank logoequity financial trust

B2B Bank announced two alternative programs this spring, and Equity Financial Trust announced its own commitment to the space in July.