21 Feb Mortgage growth of Canadian banks has decreased to its lowest point in 17 years
Previously a staple for bank profit, mortgage investment growth is near rock bottom. Mortgages were previously the most growing and profitable sector of the big banks, says Craig Fehr with Edward Jones & Co. “The bread-and-butter of profitability for Canadian banks — is going to have a little less butter on the bread; That is, in many cases, the largest and most profitable and steady of the businesses that these banks operate.”
The primary reason for the slowed earnings among banks is the competition in the mortgage lending field. In years prior, it was the norm for individuals to shop at the bank for their mortgage needs. Borrowers are becoming more and more educated towards the fact that there are likely better rates and terms available elsewhere. With less competition, the big banks didn’t need to cut their rates so aggressively to be competitive, now there are more lenders vying for the consumer’s business. It’s unlikely the banks will be able to reverse this trend as borrowers become more educated, especially with all of the competitive resources online in the marketplace.