Canadian home owners are growing increasingly anxious about their finances, according to a report by Mortgage Professionals Canada. Specifically, 70% of Canadians surveyed said they’re nervous about their family’s financial situation in the coming months, a 17% increase from last year. It also appears that much of this anxiety is stemming from the so-called “mortgage renewal cliff”.
The Office of the Superintendent of Financial Institutions (OSFI) highlighted the issue in a report showing that 76% of mortgages outstanding as of February 2024 will come up for renewal by the end of 2026. These homeowners could experience payment shock due to drastic rate increases. The Bank of Canada estimates that average mortgage payments have already increased by about 9% and could nearly double to 17% by 2027.
With this news, it’s not surprising that more than three-quarters of mortgage holders facing a renewal in the next year are anxious about it—a 10% increase compared to last year. OSFI also warns that higher monthly mortgage payments following renewal could lead to more residential mortgage loans falling into arrears or defaults.
As a trusted adviser, you can significantly ease your clients’ concerns by taking a proactive approach. Reach out to clients nearing renewal to understand their current financial situation and what’s causing them the most concern. Help them estimate potential renewal rates and monthly payments. In some cases, you can alleviate their concerns by demonstrating how they’ll be able to handle these increased costs after renewal. On the other hand, if a client is already being stretched thin, you can help them come up with a plan to prepare for their renewal. This plan could range from making small changes to their budget to exploring financing options to restructure their overall finances for the best outcome. As part of this plan, private and other alternative lenders may offer solutions that can help these mortgage holders navigate this challenging period.
Private lending can help ease your clients’ mortgage renewal anxiety
If your client is concerned about how their upcoming mortgage renewal will affect them, private mortgage lenders can offer flexible and accessible lending solutions that can act as a vital lifeline. Private mortgage lenders can offer flexibility that traditional lenders can’t, which can be particularly beneficial for clients facing financial challenges and other other setbacks. This flexibility is especially valuable for those who might be dealing with changes to their job or household income, struggling with credit issues, or who were already stretched before rates spiked.
Overall, private lending plays an important role in providing financing to borrowers that are underserved by banks and other traditional lenders. Private mortgage lenders take a more holistic approach, which allows them to serve borrowers that can’t qualify for traditional financing due to strict lending criteria. A private mortgage lender like CMI can tailor specific solutions that best meet a borrower’s specific needs and will consider a borrower’s broader financial story to determine their ability to repay—looking beyond their credit score and other standard metrics, such as loan- to-value and debt ratios.
Private mortgage lenders have the flexibility to provide innovative and personalized solutions that can be used as part of a larger strategy to help get your clients where they need to be. Custom options like prepaid terms can provide valuable cash flow relief while borrowers get back on their feet financially. Private mortgage lenders are also able to offer mortgage solutions that traditional banks either don’t have access to or only offer to a select group of borrowers, such as a second mortgage to help consolidate debt, a blanket mortgage, a bundle mortgage or bridge financing.
For example, a client anxious about their mortgage renewal in 12 months could consider proactively using a second mortgage to consolidate other debt and improve their credit. A second mortgage generally has lower rates than credit cards and other personal loans and can be used to roll multiple debts into one, making it easier to track and manage payments. By focusing on cleaning up their credit over the 12 months leading up to their renewal, the client can position themselves to secure the lowest possible rate at renewal time.
Private mortgage lenders are also highly agile and excel at helping clients in a time crunch or through challenging situations. Due to a more streamlined and tech-forward process, private mortgage lenders tend to be quicker and more efficient than banks and other traditional lenders, which allows clients to execute on a plan as soon as possible. Private mortgage lenders generally require less documentation, which can lead to quicker approvals and a more transparent process that keeps clients updated along the entire journey. Once you submit a complete application to CMI, for example, clients could know whether they’re approved in as little as a few hours, significantly reducing their stress.
We’ve got your back so you can focus on supporting anxious clients
As the mortgage landscape continues to evolve, private mortgage lenders will play an increasingly important role in supporting borrowers and promoting financial inclusivity. Having a strong private lender partnership will be game-changing when it comes to easing the anxiety that many clients may be feeling about their upcoming mortgage renewals.
At CMI, we take pride in our reputation as a transparent and trusted private mortgage lender. Our dedicated broker relationship managers are here to support you with expert and tailored guidance to address specific client scenarios and unique concerns. We focus on building strong relationships with you, so you can focus on nurturing your client relationships and ensuring they feel supported and valued throughout their mortgage renewal journey. With flexible lending criteria, a fast and tech-driven process, and personalized service, CMI is the ideal private lending partner to help you ease your clients’ renewal anxiety.
