Sub-prime mortgages are mortgages for those people who don’t normally qualify for the lowest interest rates or the best mortgage products based on their tarnished or poor credit histories. They can, however, still qualify for a mortgage, but will end up paying higher interest rates and/or fees.
Recently, there has been a bit of a meltdown in the United States in the sub-prime mortgage market (or the alternative mortgage market, as we know it in Canada). Sub-prime borrowers have started defaulting on their mortgages en masse in recent months due to rising interest rates, extensive use of adjustable rate mortgages, teaser rates expiring and the sometimes lax lending practices of American sub-prime lenders.
To see how the sub-prime mortgage market in the United States affects Canada, please follow the “read more” link.
Now, how does the current state of the American sub-prime mortgage market affect Canada? Although the Canadian mortgage market is predominantly a prime mortgage market, some sub-prime lenders are being affected. Mostly, the investors who provide the funds for mortgage companies to lend to home buyers are hesitant about investing their money in the alternative market. This results in fewer lenders and fewer products.
Despite the fact that some alternative lenders in Canada are being affected slightly, Canada’s mortgage lending market is still strong, and expects to see $200 billion of new mortgages being issued in the coming year. For Canadian home buyers looking to obtain a mortgage, there is really nothing to worry about.
However, if you’re interested in knowing more about what’s happening in the United States right now as far as mortgages are concerned, please consider looking at one of the following links: