Last Updated on November 22, 2024 by CREW Editorial
As overall mortgage originations have shown modest growth of 3% year over year in August, individual banks are showing differences in their lending trends, with some banks posting moderate gains while others contract. Recent data from major Canadian banks shows significant variations in mortgage book growth.
Mixed Performance Across Major Banks
According to an October Edge Realty Analytics report, August saw mixed mortgage lending performances across Canada’s chartered banks. The sector’s non-prime lending continued to contract, with Equitable Bank (EQB) reporting a 1.3% month-over-month (m/m) decrease in uninsured loans, which was the most substantial drop since mid-2020. This pushed EQB’s residential loan book down to a -2.5% y/y growth rate, marking its weakest trend in over a decade.
Scotiabank (BNS) also saw a similar decline, with its residential mortgage book contracting in two of the last three months. Despite a slight uptick in its y/y growth rate to 0.5% in August, this figure is modest compared to previous performance and suggests more conservative lending policies or shifts in customer demand.
Meanwhile, CIBC showed modest improvement, with its 1.8% y/y growth rate boosted by a 0.4% m/m expansion in August—its best monthly increase in two years.
National Bank stands out with significant year-over-year growth of 9.2% in its residential mortgage book, driven largely by an 11.8% surge in insured mortgage lending. For context, the entire sector experienced a 1.4% annual contraction in insured mortgages, underscoring National Bank’s outlier status. Since early 2022, National’s insured mortgage portfolio has expanded by 26.4%, translating to a near-$10 billion increase, even as other chartered banks have seen a combined $32 billion decline in this segment.
TD Bank saw its residential loan book decline m/m in August for the first time since last December, with its y/y growth rate falling from 7.0% in July to 5.2% in August.
Strategic Differences and Risk Management in a Shifting Market
These variations in lending trends may be partly shaped by OSFI’s incoming loan-to-income (LTI) caps, which will restrict banks from exceeding a 15% cap on high-LTI loans each quarter. In response, some banks are recalibrating their mortgage portfolios, while others maintain growth, signalling a diverse approach to regulatory compliance and risk tolerance. As the market awaits November’s LTI cap rollout, it’s likely that additional shifts in lending patterns will emerge, especially if OSFI relaxes the current stress test in response to the stricter LTI ceiling.
