Alternative Lenders Embrace Complexity as Canadian Mortgage Market Evolves

Canada's alternative lending sector has undergone significant changes in recent years, shifting beyond its traditional focus on borrowers with bruised credit. Instead, alternative lenders are now catering to a broader range of clients, including self-employed individuals, investors, and entrepreneurs with complex income structures.

According to Grant Armstrong, chief growth officer at WealthONE Bank of Canada, the average FICO score of his institution's alt borrowers is 763, which in some cases outperforms credit quality at the Big Six banks. He attributes this shift to a change in how lenders assess income, with alternative lenders adopting a more nuanced approach that considers factors such as business cash flow and investment properties.

Industry experts predict that artificial intelligence will play a significant role in shaping the future of alternative lending, with lenders already leveraging technology to streamline processes. Additionally, the integration of employment verification data into credit bureaus could further ease the lending process for borrowers.

With millions of Canadians unable to fit into the prime Big Six credit box on a full-time basis, the demand for alternative lending solutions is expected to continue growing. As one executive noted, 'the more info we know upfront, the better equipped we are to navigate a solution.'