Though experts say the policy change shouldn’t come as a surprise, and likely won’t affect a significant proportion of borrowers, the heightened restrictions on tariff-hit industries signal a troubling economic trend.
Citing the tariffs and a “turbulent economic landscape,” BMO BrokerEdge released a memo to broker partners announcing that steel and aluminum are now part of BMO’s growing list of “Limited Appetite” industries, which already includes sectors like construction, transportation, retail, manufacturing, and entertainment.
Self-employed borrowers in the affected industries now face tighter lending criteria, including a total debt service (TDS) ratio capped at 42% (from 44%), a gross debt service (GDS) ratio limited to 39%, and a requirement that at least one applicant have a minimum credit score of 750.
Since the announcement, Conservative Shadow Minister for Labour Kyle Seeback criticized the decision, suggesting BMO was “not stepping up for Canadians or Canadian workers.”
The bank, however, has defended the decision, suggesting all home financing decisions are made on a case-by-case basis, and that its underwriting standards protect consumers’ long-term financial health.
“It is very common practice for financial institutions to consider a wide range of macroeconomic factors — including industry types — when evaluating loan applications,” reads a statement provided to Canadian Mortgage Trends by BMO.
“The technical policy adjustment… doesn’t apply to employees of companies and is only one of many factors when considering the applications of self-employed applicants,” it added. “Each customer’s situation is unique and personal, so loan applications are always considered individually.”
Not everyone sees the change as cause for alarm.
“I didn’t think it was a big deal, and I’m surprised that everybody’s making a kerfuffle about it,” says David Larock of Integrated Mortgage Planners. “People are angry and are looking for places to direct their anger, and I guess this has become a lightning rod.”
Only a small proportion of borrowers affected
Larock explains that on the surface, restrictions against a hard-hit industry might seem unfair or unjust, but he suggests this policy change is well within the normal course of business for lenders and only affects a relatively tiny proportion of borrowers.
“When you think about all the people who apply for mortgages, only a small percentage of them fall in that category of a total debt service ratio between 42% and 44%,” he says. “So, you have to be self-employed, in this specific industry, and you have to be right at the upper end of affordability.”
Larock doesn’t want to minimize the impact this will have on those affected but notes that very few borrowers will meet all the criteria necessary to face restrictions.
Is BMO the only one? Or the only one being transparent?
Larock also worries that the criticism BMO has faced since making the announcement may cause other banks to make similar policy changes more quietly.
“Nobody should be under the impression that only BMO sees this increased risk and is responding to it,” he says. “Other lenders could easily decide, ‘well, BMO has gotten so much heat for their communication of this policy tweak’ — and again, it’s a very minor adjustment — ‘so we’ll just find ways to turn deals down for other reasons.’”
That, he fears, ultimately does the industry a disservice, as borrowers could be turned down for reasons that aren’t clearly communicated.
“A clearly communicated policy should always be the preferred option, because at least then when we’re talking to clients, we know what we’re dealing with,” he says. “To the brokers who are critical of BMO, do you think that will make lenders more willing to communicate these types of policy changes or less? And if they’re less likely to be transparent with us, are we better or worse off?”
A “shot across the bow”
Despite its limited real-world impact, the inclusion of steel and aluminum in BMO’s limited appetite list serves as a clear signal of the economic strain caused by the U.S.–Canada trade war.
For many, it’s not what the change means in literal terms, but what it represents.
“This is like a shot across the bow,” says rate expert Ryan Sims of TMG. “With the announcement of 25% tariff on automobiles, will we see auto manufacturing added to that list?”
Sims also notes that the aluminum and steel industries are being added to an already exhaustive list, which includes self-employed workers in construction, transportation, entertainment, retail sales, banking and finance, manufacturing, natural resources, whole trading and utilities.
“It would have been quicker and a shorter list to say, ‘here’s the industry we don’t consider limited appetite,’” he jokes, adding there was little if any reaction to the inclusion of those other sectors.
Though the announcement delivered a discouraging message about the effects of American tariffs against steel and aluminum workers, Sims emphasizes that it won’t have as significant an impact on brokers and borrowers.
“If you send in a file with great credit, low debt, a low loan-to-value, a triple-A polished looking deal, the bank is probably going to overlook the industry,” he says. “If you’re sending in that deal that’s got some hair on it — like the credit isn’t great and the ratios are tight and there’s high loan-to-value, a lot of unsecured debt, negative net worth — they’re probably going to find a reason to decline that deal anyway.”
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Last modified: March 28, 2025