What does Home Capital know that we don’t? In the second quarter 2015, originations of high-margin uninsured mortgages had plunged 16% from a year ago, to C$1.29 billion. And originations of lower-margin insured single-family mortgages had plummeted 55% to C$280 million. A warning sign flaring up in Canada’s majestic housing market where prices have soared for years, in an economy rattled by the oil price crash and other issues. HCG suddenly decided to use a “conservative approach to growing its residential mortgage business.” What had spooked it? What does Home Capital know that we don’t? It didn’t say.
And it blamed “the competitive market for prime insured mortgages.” Who are you kidding? With mortgage lenders falling all over each other trying to outdo each other to lend in an environment of record low mortgage interest rates and soaring home prices, where buyers outdo each other in bidding wars… what could possibly go wrong?