Bravo festival condos floor plan. To depress house prices? Canada’s banking regulator is looking at the most popular home equity credit lines and considering curbing risky lending in response to the pressure of rising interest rates on highly indebted homeowners.Please Visit: Bravo festival condos floor plan to Get Your VVIP Registration Today!
The loan product examined by the Office of Financial institutions Supervision (OSFI) is revolving mortgage loans (readvanceable mortgage), which combines home mortgage loans and home equity credit lines (home equity line of credit). Borrowers with revolving mortgages increase their credit lines when they repay the principal of the loan.
OSFI also calls this kind of loan the mortgage-HELOC combined loan program, or CLPs, which is very popular when house prices soar.
In the first two years of the new crown epidemic, revolving mortgage loans increased by 34%, with a total value of $737 billion in the first quarter of 2022, according to the Bank of Canada. This accounts for 42 per cent of all guaranteed housing loans, up from 37 per cent in the first quarter of 2020 and 36.5 per cent in the same period in 2019.
This sharp increase has attracted the attention of OSFI. In a speech in January, Peter Routledge, director of OSFI, said revolving mortgage loans now constitute “a large part of Canada’s uninsured household mortgage debt”. If used responsibly, it can become a useful financial instrument, but it can also create loopholes in the financial system and increase the “risk of losses to lenders”.
OSFI has said it will revise the rules governing these products this spring and outlines two key issues.
One is that the ability to borrow from a house after each principal repayment can plunge customers into debt; the other is that HELOC could be used to cover up potential cash flow problems for borrowers, making it harder for lenders and regulators to spot potential problems, especially in times of crisis.
In a speech in November, Routledge hinted that OSFI might force banks to classify revolving mortgage loans as riskier loans, which would make it more expensive for lenders to write and allocate more capital for each loan. He also said regulators could tighten rules for lenders to issue these loans.
Regulators could also limit the amount homeowners can borrow against their homes or force them to re-qualify for an increase in their HELOC quota, banking and loan experts say.