MLN NewsStream

Policymakers have waged a two-pronged attack on fixed-payment variable-rate mortgages.

Last week, the BoC's Senior Deputy Governor Carolyn Rodgers came out swinging, telling Bloomberg:

“I think you’ll see the industry reflect on how much they want to offer that product. It is concerning. You don’t want a big portfolio of negative amortizing mortgages. It’s not good for the banks and it’s not good for the mortgage holders."

In what seemed to be a coordinated attack, OSFI head Peter Routledge piled on last week, labelling static-payment variables "dangerous" in senate committee testimony. His stated reason: in cases where interest exceeds the borrower's payment, and their balance grows, this "increases the risk of default."

Are we getting the whole picture?

Pine trees can be prickly. How appropriate because that's exactly what kind of competitor Pine Canada Financial Corporation ("Pine") is becoming.

You'll notice in the rate table below, Pine has decided to emerge from the forest undergrowth and overtake every national lender in uninsured 1- to 5-year fixed pricing.

That's an interesting development from a tiny online lender whose staying power some questioned. Heck, when we first reviewed the company 15 months ago, we wondered if its $27+ million in VC funding amounted to bonfire kindling.

It turns out prickly little Pine isn't such an easy-to-dismiss competitor. It just accomplished one of the most difficult of tasks in the Canadian mortgage industry:

With cutthroat mortgage competition, plummeting insured volumes and margins so thin they'd starve a supermodel, it's been way more challenging to make money in insured lending.

That and non-stop regulatory tightening have inspired mortgage finance companies to jump headfirst into the alternative lending pool.

Strive is no exception. It's been piloting its new "Aspire" non-prime products since summer. Now, the company has hired a sales director for alternative lending, is adding new funding partners and is opening up the product to more brokers in Alberta, B.C. and Ontario.

As traditional prime lenders turn down more borrowers due to credit and qualification constraints, "the Alt-A credit profiles we're seeing are strong," says Steve Kissuk, Chief Credit Officer and Co-Founder at Strive.

It's hard to take a firm position on which mortgage term is optimal for most people at any given time. But on Friday, we did just that by awarding the "MVT" (most valuable term) to floating-rate mortgages.

Now, we take such declarations seriously and didn't just pull this call out of fortune cookie. Multiple factors went into MLN's analysis, including:

Just when you thought jobs data Fridays couldn't get more exciting, the economic deities serve up two reports tailor-made for low-rate aficionados.

Today's softer-than-expected employment data is keeping North American bond yields in a nosedive. And given the market's positive reaction to U.S. Treasury supply projections, it looks increasingly likely that the ceiling for yields is in.

With economic deterioration mounting and bond bulls stampeding away from 5% yields, Bruce Buffer would probably tell you, "It's time!" to bet on variables.