In response to rising house prices and stricter government regulations, banks are compelled to adjust their lending policies accordingly. This has sparked an ongoing battle between the lending industry and regulators that show no signs of abating.
A perfect example of this conflict is seen in the recent mortgage rate hikes seen across the country. Despite accusations from the Big Six banks that the Office of the Superintendent of Financial Institutions (OSFI) was overstepping its bounds, those same banks ultimately complied with the new regulations and are now basing their mortgage rates off of higher five-yearACMPRs (Advertised Contract Mortgage Rate).
While OSFI has imposed the new measures to protect consumers from potential market risk, lenders are arguing that it is having a negative effect on competition. The higher advertised rates make it more difficult for smaller players to compete, as they do not have the same resources or access to alternative funding sources. Furthermore, the discrepancy between what is charged by larger and smaller players raises concerns about whether all consumers are getting equal access to the best offers available.
In addition to the debate over mortgage rates, there is also an ongoing struggle between lenders and regulators regarding which loan products can be offered to the public. For instance, some lenders believe that OSFI is unfairly restricting access to certain adjustable-rate mortgages (ARMs), despite the fact that such mortgages can offer consumers greater flexibility and savings. On the other hand, regulators argue that these products can be more risky and thus must be closely monitored.
The fight between lenders and regulators will likely continue for the foreseeable future, resulting in an ongoing tug of war over mortgage rates and restrictions. Both sides are motivated by their own self-interest, but ultimately the consumer should come out ahead. In the end, regulations may be necessary to protect them from excessive risk, while lenders will need to continually strive to provide competitive offers that meet the needs of borrowers.
This article was contributed on Sep 27, 2023
