Royal Bank of Canada scraps limit on size of newcomer mortgages
By Julie Gordon
VANCOUVER Nov 2 (Reuters) - The Royal Bank of Canada scrapped an internal limit on mortgage loan size for immigrants in the spring to tap into surging demand for financing on multi-million dollar houses by newcomers to Vancouver.
Wealthy buyers, mostly from China, are fueling a booming mortgage business in Vancouver, where the median price for a detached home on the desirable west side jumped 31 percent to C$2.87 million ($2.19 million) in the last two years.
RBC, Canada's largest bank, removed its C$1.25 million cap on loans to borrowers with no local credit history in May, said Christine Shisler, the bank's Director of Multicultural Markets, who works with an immigrant clientele.
"We're seeing a lot of affluent newcomers looking to buy high-purchase price homes," she said. "Now we can actually service any mortgage amount."
A case study released on Monday, which looked at six months worth of detached home sales in prime neighborhoods near the University of British Columbia (UBC) main campus, found that two-thirds of buyers had names typical of people from mainland China and 88 percent of those people also had a mortgage.
The mortgages, on homes ranging in value from C$1.25 million to more than C$9 million, were mainly backed by three banks - HSBC Canada, Canadian Imperial Bank of Commerce (CIBC) and Bank of Montreal (BMO). RBC held just 8 percent of the loans.
The banks have not broken out the size or profitability of this business segment.
Andy Yan, an urban planner and adjunct professor at UBC who studied land titles linked to 172 sales transactions from Aug. 2014 to Feb. 2015, said the financing was the most surprising part of the study. Continued...