A surge in Canadians borrowing money to buy homes has warned of a possible default domino effect.
Ontario’s private mortgage market grew 72% from $13 billion in 2019 to $22.4 billion in 2021, according to a report recently released by the Ontario Financial Supervisory Service (FSRA).
In this regard, the Korean mortgage brokerage industry also agreed that the proportion of Koreans using private loans to purchase houses has increased significantly.
Jung-wook, CEO of Huntington Mortgage, explained, “Recently, 3 to 4 out of 10 customers are using private loans. However, private loans are not well recognized in Korea because of their dark side, but not to that extent in Canada.”
He emphasized, “The majority of customers who use private bonds are forced to use them because their mortgage loans are rejected by large banks,” he said.
Citing some mortgage industry insiders, the daily Toronto Star warned, “About 20% of Ontario’s mortgages are operated through private moneylenders.” did.
“It is true that the demand for private bonds has increased,” said a mortgage broker. “However, while recent regulatory agencies have strengthened the qualifications of mortgage brokers who handle private bonds, private debt borrowers also tend to avoid lending if the loan-to-household ratio is too high.” he said.
He said, “In the case of Koreans, the willingness to repay loans is exceptional, so the probability of default in the Korean community is low.”
On the other hand, among general mortgage borrowers, there is a high voice that default will increase. According to the Canadian Bankers Association, as of November 2022, 0.07% of 2.2 million mortgage holders were unable to make payments.
Experts estimate that if the number of defaulters increases to the 0.6% level, 13,203 mortgage defaults per month.
It was predicted that this could have a major impact on the real estate market.