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Residential mortgage growth was down more than 7% in the first half of 2019 compared to a year earlier, likely caused in part by the federal government’s mortgage stress test, according to new data from the Canada Mortgage and Housing Corporation (CMHC).

The quarterly Residential Mortgage Industry Dashboard shows new originations by the country’s chartered banks totalled $60.26 billion in the first half of the year, down from $64.93 billion in 2018. Similarly, growth of same-lender refinances were down 14.5% to $30 billion and same-lender renewals fell 9% to $86 billion.

“(The) residential mortgage market continues to show slowing growth, with activity mainly focusing on renewals with the same lender,” CMHC noted.

It also suggested the slower growth in the residential mortgage market is “likely attributed to the stress test.”

The mortgage stress test on uninsured mortgages took effect on January 1, 2018. After coming into effect, it is estimated that 18% of buyers who could previously afford their preferred purchase would fail the test, according to data from Mortgage Professionals Canada.

Additionally, the Bank of Canada raised interest rates three times in 2018. Two of the quarter-point rate increases came in July and October, the effects of which would have extended into early 2019.

CMHC did say that slow growth of the residential mortgage market, along with low mortgage default rates, has helped to improve Canada’s financial stability.

Banks Are the Market Leaders

CMHC’s report also delved into the current market share of outstanding mortgage balances, finding that 75% are held by banks.

Credit unions and caisses populaires have a 14% share, followed by Mortgage Finance Companies (MFCs) at 6%, and Mortgage Investment Corporations (MICs) and private lenders at just 1%.

MICs, which aren’t regulated in the same way that banks are and aren’t subject to the mortgage stress test, had an estimated market size of $13 billion in 2018, CMHC said. That’s up 10% from the year before, and up from an estimated $8-10 billion market size in 2016.

Delinquency rates were found to be lowest among credit unions and caisses populaires, at just 0.16%, and higher among MICs and private lenders, at 1.92%.

CMHC Residential Mortgage Industry Dashboard

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