UPDATE 1-Royal Bank of Canada scraps limit on size of newcomer mortgages
(Adds comments from Vancouver mayor, online reaction)
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. Continued...