Home Capital anticipates record surge in mortgage renewals as it reports steep profit drop
TORONTO — Home Capital Group Inc. is anticipating the highest mortgage renewal rate ever in the alternative lender’s history, in the wake of new regulations and company initiatives to stay competitive.
Home Capital CEO Yousry Bissada says the Toronto-based mortgage lender is “back in all aspects of our business” despite reporting a 40 per cent year-over-year drop in net income in the latest quarter, compared to a year ago.
It reported fiscal first quarter net income of $34.6 million, beating analyst expectations but falling short of the $58 million earned a year ago before the lender was hit with allegations of misleading investors and faced a run on its deposits.
Bissada says Home Capital expects higher levels of mortgage renewals going forward to give the company a boost, as borrowers who stick with their current lenders can avoid a new stress test for uninsured mortgages that make it harder for homebuyers to qualify.
He told analysts on a conference call that the new mortgage guidelines, introduced this year, combined with new company initiatives will produce the highest mortgage renewal rates in Home Capital’s 30-year history.
He adds that Home Capital is also offering more competitive mortgage rates as it faces competition from private lenders and other institutions which are not federally-regulated, and not required to apply the new stress test.