Amid accelerated price growth, many hopeful home buyers in Ottawa are either cooperating with friends or seeking help from the “Bank of Mom and Dad” for assistance on the payment, according to observers on the ground.
The B-20 regulations that have introduced much stricter mortgage stress testing have been blamed for the province’s fevered price growth, with an average rate of nearly 15% from 2016 to 2018. These increases have placed the city’s average home price at $433,500 as of December 2018.
Ottawa broker Chris Allard said that he has seen a “significant” increase in the number of cases involving would-be buyers who have received funds from relatives, or co-signed applications with friends.
“If there’s an option at all for parents or family members to gift funds or to co-sign, they will take that option before choosing to pay a higher mortgage interest rate,” Allard told the Ottawa Business Journal.
Read more: Ottawa’s pace of home price growth accelerates
B-20 inadvertently pushed a significant proportion of prospective buyers out of the market, despite some observable cooling down in Toronto and Vancouver prices.
Traditional lenders have also ended up with a larger number of rejections, paving the way for alternative mortgage sources like the Ottawa-based firm Advanced Mortgage Investment Corp.
“We turn down more, but all of the good stuff that all of the rule changes have left behind is where we really step in and earn our keep, so to speak,” founding partner Michael Hapke said. “If you build a wall, you’ll figure out how to go over it, under it or around it.”
“These mortgage rule changes have made it more difficult, and what we’re seeing on the private lending side is the quality of business that is coming over to us is second to none. It’s fantastic.”
According to the BoC, alternative lenders are now responsible for approximately 8% of all mortgages nationwide, with the segment’s share of the Canadian market having doubled since 2015.
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