A growing number of Canadians are seeking mortgages from alternative lenders such as
credit unions and private lenders as interest rates rise, industry data shows.
Insurance and financial website Ratesdotca says credit unions and private lenders made up
about 3.7% of Canada’s mortgage business for all of 2021 but have already handled 6.7% of
new mortgages this year.
Canadians are drawn to alternative lenders because fixed mortgage rates are rising along with
interest rates and are now just above 4% in many provinces and territories.
Borrowers now must qualify for a mortgage at a higher rate because the qualifying rate on
uninsured mortgages under Canada's stress test is either two percentage points above the
contract rate, or 5.25%, whichever is greater.
This means that Canadians looking for a five-year, fixed rate mortgage have to qualify at 6% or
6.5% through traditional lenders.
But when consumers visit credit unions, they can qualify at their five-year contract rate or a
contract rate plus 1% when seeking a variable rate mortgage.
