End of the Cycle Signals in Mortgage World

Let's just agree that this has been a hell of a 12 month run in Real Estate and Mortgage World

Sales records, price increase records in RE and sales records among mortgage lenders, the RESL Divisions of Banks,

2/

Records set for origination for many Mortgage Brokerage companies including our own

Naturally in my industry many fingers have been broken high fiving ourselves on how brilliant we Mortgage Brokers are and how hard we work (Nurses and Physicians shaking heads in disgust)

3/

Reality is many factors coalesced to create these records: lowest mortgage rates in the history of history, flight from condos as an outcome of the Pandemic, usual suspects

In the first 10 months of the Boom ending this January the mortgages largely made sense

4/

The prices were way high but the applicants were well qualified, debt ratios (including Stress Test) were reasonable

Many smart, experienced people took advantage of super low fixed rates to switch into lower rate mortgages with no increase in mortgage amount

Sensible stuff

5/

Other than the house prices being ridiculous: mortgages were pretty normal

What's changed in the last few months?

Rational mortgages are fewer

Some people are really stretching debt ratios to be approved

More people who need mortgages are buying without pre-approvals

6/

Some of those people are ending up in B lending

Bigger and bigger gifts from parents and relatives

More and more co-signers: although it's still a small percentage of total applications the number of mortgage applications with 3 or 4 applicants has tripled or quadrupled

7/

We have to shoehorn applications into ultra specific lenders who may not use the Stress Test like provincially regulated Credit Unions

The list goes on

Bottom line is the desire to own a home burns bright but the edges of the financing are fraying