When Toronto actor Shawn Ahmed asked his bank for a mortgage in early 2013, he ran up against the lending policies that some say are shutting young contract workers out of the loans market altogether.
Ahmed was drawing a full-time salary working in sales for a theatre company and, at 27, had already appeared in numerous TV shows and movies including the sixth chapter of the Saw franchise.
But TD Bank and then PC Financial turned down his applications because he didn’t fit their framework for an ideal borrower, Ahmed said.
One bank wanted him to prove four years of salary at the same job, he said, and both institutions told him from the beginning that any mortgage would probably be less than he wanted.
“The process wasn’t exactly hard. It wasn’t difficult to be rejected,” Ahmed said. “I was never going to get a mortgage for a place I actually wanted to live.”
He turned to private lender RCI Capital on the recommendation of his real-estate agent, and signed the papers for a mortgage on a one-bedroom condo in Toronto’s Regent Park neighbourhood in July 2014.
“The bank’s process is very black and white,” Ahmed said. “There was definitely no problem-solving.”
Ahmed faced the problem of an increasing number of young people, the so-called Millennial generation of those under 35 for which contract and short-term employment is much more common than full-time work.
The number of contract workers has grown more than four times faster than the number of full-time employees since 2008, according to Statistics Canada.
Young people have seen a big shift from full-time employment, which has grown 3.5 per cent since 2008 for those aged 25 and 44, to contract work, which is up 24.9 per cent in the same period.
McMaster University labour studies professor Wayne Lewchuck said he has heard from many contract workers who have consistent difficulty in getting loans.
“We’ve seen a lot more contract work in the last decade,” he said. “Banks are reluctant to take on the risks of lending to someone who doesn’t have a steady stream of income.”
Yet Canada’s big banks haven’t updated their lending rules to deal with this new reality, said Julie Fortier, who ran into troubles securing a mortgage.
When Fortier and her husband first applied for a mortgage in 2012, her bank said their contract positions wouldn’t be enough to guarantee a loan, she said.
“We’re all on contract,” said Fortier, 32. “Banks don’t really understand how to deal with it.
“I’d had steady employment since 2005 in my field, but it wasn’t good enough.”
Fortier eventually received a loan from her husband’s bank.
“If you don’t have a permanent job, it doesn’t matter where you are or what you’re doing or how much you’re making,” Fortier said. “All they care about is permanency. It’s such a Baby Boomer mindset.”
Now new lenders are making their way into the market, with online outlets such as Borrowell and Grouplend looking to bridge the gap between high-interest credit cards and low-cost loans.
Borrowell CEO Andrew Graham and Grouplend CEO Kevin Sandhu said their products use personal information to build a more complete picture of a borrower to offer loans and rates to people who believe they are being ignored by the major banks.