This article looks at the effects of these changes on Canadian mortgage applicants who are being denied for mortgages.
It begins by discussing the various regulations and practices that banks have implemented to reduce their risk in lending, such as more stringent income and credit requirements, lower maximum debt service ratios, and increased scrutiny of borrowers’ documentation. It is noted that while these measures can help protect banks against fraud and irresponsible lending, they can also make it more difficult for some potential homeowners to get approved for a mortgage.
The article then discusses the implications of the banking sector’s tightened lending practices. It notes that this may lead to more people renting rather than owning their own homes, could exacerbate inequality, and decrease the potential for wealth-building through home ownership. It is also suggested that more people may find themselves in financial difficulty if banks become too stringent in their lending criteria, as these same borrowers may no longer be able to secure a mortgage.
The article concludes by exploring the potential solutions to the problem. It is suggested that banks should work closely with borrowers to help them understand their financial situations better and to ensure that their mortgage applications are complete and accurate. Additionally, it is argued that the government should consider increasing access to lower-cost mortgages for low-income borrowers.
In summary, this article examines the effects of banks turning away from borrowers due to stricter regulations and lending practices. It is argued that this may have a negative impact on potential homeowners, such as more people renting rather than owning homes, potential increased inequality, and decreased wealth-building opportunities. The article also suggests potential solutions to the problem, such as banks working closely with borrowers to ensure their information is complete and accurate, and the government considering providing access to lower-cost mortgages for low-income borrowers.
This article was contributed on Oct 23, 2023
