SUBPRIME LENDER RESORTS TO BORROWING AT SUBPRIME: CANADIAN MORTGAGE RATES TO MOVE HIGHER? - Ira SmithTrustee & Receiver Inc. - Brandon's Blog (2024)

FAQs

What percentage of Canadian mortgages are subprime? ›

Despite the higher interest rates, you will be surprised that 12% of Canadian mortgages are subprime mortgages (according to TransUnion Canada statistics).

The higher the credit score, the more likely a person is to be approved for prime rates – interest rates in favour of good credit. Prime customers typically have a credit score that is 670 or higher, whereas customers that have credit scores less than 670 are generally considered subprime.

While subprime home loans still exist today — and might be referred to as a non-qualified mortgage — they are subject to more oversight. They also tend to have higher interest rates and larger down payment requirements than conventional loans.

For conventional mortgages, it typically stretches from around 10% to 20% of the home's purchase price. For subprime mortgages, that rate can go as high as 35%, though it can also go as low as 3%.

A subprime mortgage is for borrowers who don't meet the standard lending criteria. An alternative or B lender offer subprime mortgages in Canada. Since a subprime borrower will typically carry more risk, the rates tend to be higher and often come with a fee from subprime lenders.

Citadel Servicing is billed as the largest subprime mortgage lender in the United States and has a history of taking on some of the riskiest credit applications ever.

The lowest credit score in Canada is in the 300 range while the highest tends to be in the 800 range. Here's how to know where you fall and how to boost your credit score and use your fluctuating credit scores to improve your credit history and increase credit limit and reports.

There is no one-size-fits-all answer to the credit scores that lenders consider subprime, but Experian provides a classification: FICO Scores that fall within the fair and average credit range — between 580 and 669 — are classified as subprime. However, each lender may use a different range.

Deep subprime (credit scores below 580) Subprime (credit scores of 580-619) Near-prime (credit scores of 620-659) Prime (credit scores of 660-719)

The mere mention of the word "subprime" is enough to send chills down the backs of investors, bankers, and homeowners. And there's a very good reason why. Subprime mortgage were one of the main drivers that led to the Great Recession. 1 But they seem to be making a comeback with a new name—nonprime mortgages.

Is Capital One a subprime credit card? ›

Real-World Example of a Subprime Credit Card

Some of these cards, such as the offerings by Capital One and Bank of America, require an upfront security deposit, typically between $100 and $300. 3 Others, such as the Credit One Bank Visa card, are unsecured.

Borrowers must have a credit score over a certain threshold to qualify. Since NINJA loans are generally provided through subprime lenders, however, their credit score requirements may be lower than those of mainstream lenders, such as major banks. NINJA loans are structured with varying terms.

You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.

Predatory lending is any lending practice that uses deceptive or unethical means to convince you to accept a loan under unfair terms or to accept a loan that you don't actually need.

Subprime Is Canada's Fastest Growing Borrower Segment

The number of subprime borrowers jumped 9% over the past year to hit 2.64 million in Q2 2023. High risk borrowers grew at nearly double the rate of near prime and prime borrowers (+5%), and over 4x the rate of high-quality, above prime borrowers (+2%).

Roughly half of new mortgages in early 2022 were variable-rate ones, but that number dropped to just 6% in August 2023, according Canada's housing agency. The share of fixed rate loans among five-year and three-year mortgages rose to 68% in August compared with 32% a year ago.

Mortgage delinquency rates were up more than 50 per cent at the end of last year from the year before, with two provinces leading the way, says the Equifax Canada credit trends report for the fourth quarter.

The most common mortgage term in Canada is a shorter-term mortgage, usually five years or less. With a shorter-term mortgage, you must renew your mortgage contract more quickly. However, you do have options, such as: Choosing between a fixed or a variable interest rate.