Calgary borrowers scrutinized further amid market instability
The credit crunch in the United States is creating a chill among borrowers and lenders in Calgary as construction halts on some projects and banks give closer scrutiny to loan applications.
Construction has stopped on the Solara Canmore Resort & Spa in Canmore after the luxury complex ran into trouble securing the final $3 million in financing on the $135-million project, said Robert Adelson, president of K2 Developments.
Fifty of the building's 214 units are unsold, but Adelson said he expects the shutdown to only last another week while the company changes its marketing strategy from full to partial ownership in a bid to kick-start sales.
An independent mortgage broker in Calgary says lenders are being much more diligent and cautious in their approval process, taking closer looks at applicants' credit history and earning power.
"We're seeing much greater scrutiny now and I think the banks and trust companies are seeing what's happening in the United States and everybody's having another look at lending guidelines," said Lori Ames of Pro Link Mortgages on Tuesday.
Even though the Canada Mortgage and Housing Corporation will no longer be offering the no-money-down mortgage and 40-year amortizations in two weeks, some lenders have already stopped offering them.
"As soon as they start talking about it, all the banks start making those changes early. So even though it's not supposed to have happened yet, it's already started to happen," Ames said.
Calgary mayor looking at long-term impact
A sales manager at Stampede GMC in downtown Calgary said people are increasingly opting to buy a used car with cash, rather than making a down payment on a new car and financing the rest.
But other dealerships say business can still be good.
"We seem to notice that some of the lenders are taking the approach to find opportunity where others may be getting more conservative. And so there might be a lending institution that picks up more business when it's being declined elsewhere," said Michael Bickert, co-owner of Heninger Toyota.
As market instability shakes consumer confidence, Calgary's mayor said he's worried about the longer-term impacts on the city.
"Things look very good in terms of the fundamentals but yes, we are very concerned in terms of what's happening with the housing market, the severe fluctuations in the oil and gas side," Dave Bronconnier told reporters after a speech to the Downtown Rotary Club on Tuesday.