Mortgage 101 – Protecting Canadians from Financial Risks

Sandi Burns, Chief Credit Officer at Manulife Bank, joins Clinton and Todd to discuss her role in setting mortgage guidelines and managing the lending portfolio while highlighting Manulife’s unique mortgage product.

Todd Veinotte
Sandi, welcome back to Mortgage 101, your guide to home ownership with me, Todd Veinotte, and our mortgage guru, Clinton Wilkins, and of course, Clinton, why don’t you introduce our guest?

Clinton Wilkins
We had a wonderful guest last year. Thanks so much for coming back. We have Sandi Burns, the Chief Credit Officer for Manulife Bank.

Sandi Burns
Thank you so much. Happy to be here again.

Todd Veinotte
All right. So it might be self-explanatory to some people out there, but for those who don’t know exactly what your role would be, let everybody know, kind of an overview of what you do at Manulife.

Sandi Burns
Yeah, I like to explain my role by thinking most folks out there, especially because this is a mortgage podcast, have applied for a mortgage, so I’m the person who decides a lot of the guidelines that you have to follow so that you qualify for a mortgage with Manulife Bank. And then I manage our lending portfolio as well, so I kind of see both sides of the coin, both the qualification, and then once you’re a customer of ours.

Todd Veinotte
And do the rules change? Are they pretty stagnant, or what do you have to and the rules come from the federal government. I’m sure they do the right thing.

Sandi Burns
So, from all angles, yeah, it’s funny if you look at a timeline of mortgages, so in the 1950s is when mortgages first started to be a thing. And, if you look at the timeline, changes, nothing, nothing, nothing. There would be a blip here and there and then. When you hit 2020, 12 ish is when things started to go wild. So in response to the global financial crisis, the federal government kind of got involved and and even though Canada wasn’t nearly as impacted as the US, and globally some other countries, there was still a big reaction to, how are we going to federally regulate mortgages in particular? So, Residential Lending is heavily regulated, and so we see changes quite frequently, depending on what you’re seeing in the economy, in trends with consumer debt and housing markets as well. And so we have to listen to our regulators, implement any changes that they require. And then, on top of that, all financial institutions have their risk appetite. So what are the things that they’re willing to where are they willing to take risks, and not take risks?. And so that’s part of, of course, the confines of the rules, indeed, always within the confines of the rules.

Manulife’s Unique Mortgage Product

Todd Veinotte
So, how does Manulife differ in some ways or not from other institutions when it comes to that risk tolerance?

Sandi Burns
So we have a revolutionary, I shouldn’t say revolutionary anymore, because it has been around for some time, but it is. It’s a mortgage that first came from Australia. It’s called the Australian mortgage. It’s quite common in the UK as well. But it is your checking account and mortgage kind of all in one product. And you have one, the ManulifeOne. And so when you have your pay deposited into the account, every penny that sits in there helps you pay down your mortgage quicker, helps you to save on interest and everything else. And so that product allows us to support our customers through uncertain times. And I think over the last five years in particular, we’ve seen some very uncertain times, but the flexibility of the mortgage itself is very helpful for folks.

Clinton Wilkins
I find that from the Manulife one, it’s very different from some of the other offerings that similar institutions would offer. Like Scotiabank, for example, has a Scotiabank step TD, and has the TD flex line. Some of the other FIS have very similar types of products. But with Manulife, the big difference is that people can use this as a bank account, and I think that’s the biggest advantage if you’re going to have this product. Otherwise, there are lots of FIS that offer a very similar product. But if you’re going to put your pay in there and leave it in there all month and use your credit card and only pay off your credit card once a month, there can certainly be some huge advantages.

Sandi Burns
Get a lot of customer testimonials about being able to pay off their mortgage 10 to 15 years quicker than what they anticipated. And then if there’s an incident or something happens that’s unexpected, there’s that ability to access the line of credit part of the Manulife one to help them through those uncertain times.

Todd Veinotte
So, are you seeing that you talked about uncertain times, and we certainly are experiencing uncertain times right now. With what’s happening in the United States, how does consumer confidence in General right now, with tariffs, and any impact on consumer confidence?

Impact of Global Events on Consumer Confidence

Sandi Burns
Yeah, I would say that right now, the term we use the most is uncertainty, and we’re starting to see it with with consumer trends, where, especially in the residential market market, we are seeing especially like Toronto, Vancouver, Calgary, Montreal, where we expected this spring market to be one of the busiest, because we saw interest rates dropping and and a lot of. Believe pent-up demand, pent-up demand, people have been sitting on the sidelines waiting for those interest rates to drop, and we’re not seeing it as much. There are some markets that we are still seeing activity, but for the most part, people are very uncertain, and it is causing stress and and so we see people putting their houses on the market to be sold. However, the buyers are just not there. And I think a part of it is we don’t know what’s going to happen with interest rates. Another part is probably they had their savings in the stock market, which has been a bit of a roller coaster ride,

Clinton Wilkins
Especially as of the last couple of months. I need to work for at least another year, right? I joke about that, but I’m really kind of

Sandi Burns
Not joking. It’s true. It’s very, very true. And so what we’re seeing is a lot of people questioning what they should do now, and then? When you layer on top of that, this is when the great renewal has the first wave has just started up, the great renewal. So that’s folks that locked in took advantage of those super low interest rates that were happening over the pandemic, those five-year rates are now coming up for renewal and OS fee, our federal regulator, in particular, was very concerned about what was going to happen when interest rates were so high. People were renewing their mortgages where, you know, five years ago, they probably were getting in there around 2% to 3%.

Clinton Wilkins
A lot, a lot of those mortgages, some sub 2%.

Non-Mortgage Debt

Sandi Burns
And so renewals were sitting at 5, 6% now that the interest rates have dropped, we anticipated a lot of movement in the housing market, and we’re just not seeing it. So there’s some concern there. And then on the flip side, you are starting to see non-mortgage debt arrears starting to increase.

Clinton Wilkins
There was an article that Equifax had put out about credit, you know, what do you think the credit matrix looks like in Canada right now? As you know, Canadians are at an all-time high in unsecured indebtedness. Like, how are they paying?

Sandi Burns
So when we’re seeing things like investments dropping because of the stock market, we are seeing the cost of living higher. Things are costing two, three times more at the grocery store. At least, we’re seeing a bit of relief on gas, which is, which is okay, but we are starting to see the cracks happening with that non-mortgage debt. So people are going to let a credit card payment slide, or a car payment slide or a line of credit payment slide, rather than putting their home in danger; we want to protect where we live.

Todd Veinotte
But then that has the ripple effect of when they want to renew, and their credit score and all that stuff, right? So, how much of a challenge is that, when on renewal, are you seeing people with less stellar credit than they had originally?

Sandi Burns
Yeah, so it’s if you stay with your financial institution, you’ll typically get a renewal in the mail.

Clinton Wilkins
Some do check, and that’s how they offer their prices.

Todd Veinotte
How is it? Is it randomly chosen as to who gets checked and who doesn’t?

Clinton Wilkins
This is a secret sauce.

Sandi Burns
I think, for the most part, for our fixed rate, like our, sorry, our amortizing mortgages, then the renewals can be sent out if folks want to refinance. So if they want to access a little bit more of the equity in their home, or they want to look at different structures on their mortgage, or even port their mortgage to a different property, then absolutely, they’re going to go through a full qualifying. You got it? Yeah? Yeah.

Todd Veinotte
Well, thank goodness for the stress test, right? Because that paid off. Absolutely, yeah, as much as it probably feels like it’s a pain in the butt at the time for the lender, but you and I have talked a lot with that.

Clinton Wilkins
Gave us a lot of talk about years, really, but you know, thank goodness the federal government protected Canadians for themselves.

Sandi Burns
Yes, it was at the time; it was such a challenge to implement. It was a pain and and it was so difficult for consumers to understand it. It felt like just another hoop they had to jump through to get into a home at the end of the day, what we saw was that protected 1000s of Canadians from being ousted from their home, which, I mean, no one wants that to happen, so Absolutely, it was a great thing.

Clinton Wilkins
And how are Canadians paying their mortgages? You said some cracks were coming with some non-mortgage debt, but how is the mortgage debt doing? So we’re not seeing, we are seeing, osoi know that was a fear, like when the Canadian banker Association, they’d met and they’re like, Okay, the great. You know, foreclosures are coming, yes, especially with this, you know, renewal wave, yes. Are people still paying their mortgages on time?

Stress Test and Mortgage Payments

Sandi Burns
So far, we are starting to see incremental increases. So the Canadian Bankers Association reports on that, but certainly not what was anticipated, say, a year, a year and a half ago.

Todd Veinotte
We have lots and lots to talk about, but we’re going to keep you for another segment. You don’t have a choice. How does that sound?

Sandi Burns
Sounds like a plan!

Clinton Wilkins
I want to talk about Fraud Awareness Month as well.

Todd Veinotte
We’ll be back, Mortgage 101, your guide to home ownership.