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Wednesday, February 21st, 2024

Brokers facing uphill battle to win bigger cut of $215B HELOC market

By Vernon Clement Jones

Home equity lines of credit represent 22 per cent of all Canadian mortgages, or a whopping $215 billion, according to a new CAAMP report – the first to track that segment of the market largely closed to brokers.

“As far as we know this is the first time anyone has tracked that end of the mortgage market,” CAAMP Chief Economist Will Dunning “This is the first snapshot we have of the HELOC proportion of the industry, so we’re uncertain how quickly it may grow, although I think it will.”

For this year’s annual spring survey report on the residential mortgage market, the Canadian Association of Accredited Mortgage Professionals asked Canadians to specify how they financed their homes and withdrew equity. Of an approximate 9.45 million homeowners in Canada, an estimated 1.87 million hold both a mortgage and a HELOC. About 770,000 have a HELOC, but no mortgage, with the majority of Canadians holding just the mortgage itself.  Approximately 3 million lucky Canadians have no debt at all on their homes.

While brokers continue to attract as much as 30 per cent of the first mortgage business and 20 per cent of renewals, refinances and transfers, their participation in HELOCs is relatively marginal. That has to change, said one Alberta mortgage professional, his brokerage one of the few actively courting that business.

“The difficulty for brokers is, flat out, a lack of available product,” Gord McCallum, owner of First Foundation Residential Mortgages. “There aren’t enough lenders offering it, and many of the lenders that do use a double standard in that they offer HELOCs through their branches and their mobile mortgage specialists, but not through brokers. We haven’t been able to get a clear answer from them as to why that is, but it’s something that really rubs brokers the wrong way.”

While a handful of lenders in the broker channel offer those lines of credit, most aren’t willing to take a second position behind another lender. McCallum is asking brokers to support those brokers who do offer them the opportunity to satisfy client demand for the product, which often provide homeowners the quickest way to turn equity into liquidity.

The number of broker channel players in this segment of the market actually fell this year when the federal government withdrew insurance backing for HELOCs, not only for high-ratio debt but even those where a borrower’s equity is more than 80 per cent.

Ottawa made the move, effective April 18, as a way of discouraging Canadians from adding to record levels of consumer debt. While some mono-line lenders have retreated from the market in the absence of that government backing, most of the country’s big banks continue to focus on expanding their HELOC portfolios with an eye to satisfying consumer demand.

“Any growth has more to do with whether people see a need to pull out equity from their homes,” Dunning told, “and we’re still seeing a vibrant home renovation market and the willingness of Canadian homeowners to use equity in their homes to fund other investments and meet other needs.”


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