We often talk about the real-estate market, and there is one aspect of it that I wonder if it requires more attention to be focused on: the private mortgage market. I’ve had a number of clients in the last few months that have had their mortgages come up for renewal (on both personal and commercial properties). There is some “sticker shock” when we go to pricing in the environment today. Our typical clients, however, would have strong credit, strong portfolios (of course they would, collaborating with our team!), and appropriate leverage for the age and stage in the context of their overall wealth and objectives.

 

The other part of the housing market, which of course has cooled through the confluence of pandemic fading, higher interest rates, with banks being more restrictive on lending, and a slower economy, has meant that more borrowers are relying on riskier loans from non-traditional lenders. Private mortgages are usually short-term financing vehicles for households who have struggled to qualify for traditional mortgages due to insufficient debt-to-income ratios, low credit ratings or other factors. It’s hard to calculate the exact amount, but for sure, more real-estate owners have turned over to non-traditional lenders that usually offer riskier loans involving higher lending fees, more restrictions and even payouts that would only cover interest amounts rather than a combination of interest and principal. Something to consider as we are in this higher interest rate environment for the foreseeable future.

 

Of course, the youth of today: typically priced out of the aforementioned housing market, are at least not going to have to worry about the commute from their home in their cars. While these figures are from the U.S., they would be similar in Canada. As my associate Avril says: “I literally don’t know a single girl downtown that has a driver’s license. We’re all transit/uber/bike rats”. Only 60% of American 18-year-olds had a driver's license in 2021 (down from 80% in 1983). I counted the days down until I could get my driver’s license, at 16: it meant freedom (of course there was no Uber back then!). Today, only 25% of 16 years olds in the U.S. have their license! No cars, no houses, more work from home, and less commuting: it seems for the younger generation: things certainly change.

 

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