Winners & Losers: The Market Votes

Stocks downIf you want to know the winners and losers in Monday’s surprise mortgage rule announcement, peek at lenders’ stock performance.

Traders collectively decided, at least in the short-term, that the visible future is dimmer for second-tier lenders than for their big bank competitors.

The stock prices for most Big Bank challengers took it on the chin today. Here’s the scorecard for a sampling of them, as of Tuesday’s close:

Lender stocks

Most major banks performed decidedly better:

Bank stocks

Stock prices are partly emotion-driven so let’s see how things shake out in the next month or so. But the immediate opinion of those with money on the line is that Canada’s Big 6 are less impacted by the coming insurance restrictions.

More fallout from earlier today:

  • Investors handed Genworth (Canada’s second largest default insurer) its biggest intraday selloff since August 2009. The company estimated that:
    • Roughly a third of transactionally insured mortgages, mostly for first-time homebuyers, would “have difficulty meeting the [government’s] new required debt service test.
    • About half of its “total portfolio new insurance written would no longer be eligible for mortgage insurance under the new low-ratio mortgage insurance requirements.”
  • Multiple monoline lenders (including some of the biggest) announced that they were suspending new refinance, rental and/or business-for-self (BFS) originations. Expect more of that to come, unfortunately. These companies are now left wondering how they’re going to finance mortgages that can no longer be insured (mortgage buyers prefer insured product). They simply cannot lend under that uncertainty.

By Steve Huebl & Rob McLister

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  1. Comment avatar

    Roger Hicks    

    Morneau’s friends at the Big 5 banks are still celebrating…..funny he never talks about high credit card rates and high limits for clients with no jobs…..

  2. Comment avatar

    Disgusted Home Owner    

    Thanks to this atrociously thoughtless and destructive act, the Liberal government will crash in a ball of flames in the next election. Mark those words. On voting day, Oct 21, 2019, remember what Trudeau’s and Morneau’s government did to your home equity and interest costs. We must never ever ever forget this.

  3. Comment avatar

    Ron Butler    

    Interesting Home Capital did not take as much of a hit, I think the shorts have pummeled them so much for the last 18 months they are semi-immune. EQ and Home may actually find an upside in this, although their insured business will suffer the more profitable “B” may grow,

  4. Comment avatar

    Jim Tourloukis, Advent Mortgage    

    Don’t be surprised to see a bunch of brokers jump on the Mortgage Centre bandwagon so access another bank (CIBC and PC Financial). The Mortgage Centre should also benefit from this.


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