Monday Market Minute | Jan 14, 2019
One year after B-20 stress test implementation, Canadian housing data reveals a market in transition. Alternative lenders see growing demand.
What Moved
The first anniversary of OSFI's B-20 mortgage stress test coincided with CREA data confirming a national housing slowdown. Sales volume fell 11% year-over-year in 2018, with Vancouver and Toronto bearing the brunt. CMHC's latest figures showed housing starts declining, particularly in multi-unit segments. The stress test effectively locked a segment of borrowers out of traditional bank financing.
Why It Matters
The B-20 displacement created a structural tailwind for mortgage investment corporations and private lenders. Borrowers who no longer qualified at the stress-tested rate — often creditworthy individuals with non-standard income profiles — turned to the private lending market. MIC origination volumes rose throughout 2018, and early 2019 pipeline data suggested the trend was accelerating.
Signal to Watch
StatsCan household debt-to-income data due this quarter would indicate whether the stress test successfully cooled leverage or simply pushed borrowing into less-regulated channels — a critical distinction for private credit risk assessment.