TORONTO — Troubles at Home Capital Group may translate to higher mortgage rates for less creditworthy borrowers if concerns about the sector increase funding costs for other subprime lenders, experts say.

"Inevitably this will likely affect all lenders in the alternative space as it puts the spotlight on the risk, and questions the integrity of some of the mortgages they are lending on,'' said Steve Pipkey co-founder of Vancouver-based Spin Mortgage.

Home Capital has seen its stock price tumble following allegations from Ontario's securities watchdog that it misled investors. The Toronto-based company has said the allegations are without merit and pledged to defend itself.

The subprime lender — which provides loans to borrowers who don't meet the more stringent criteria of one of the big banks — has also had to secure a $2-billion credit line after depositors suddenly withdrew hundreds of millions of dollars from its high-interest savings accounts.

"There's no question that the cost of funds may go up for non-prime lenders." — Rob McLister, RateSpy.com

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Marcus Tzaferis, a Toronto-based mortgage broker with MorCan Direct, says the news about Home Capital could lead to a "crisis of confidence'' that could affect other non-bank mortgage lenders who use the GIC market to raise cash.

That could make it tougher for non-bank lenders to access funds — and that will likely trickle down to subprime borrowers via higher mortgage rates, experts say.

"There's no question that the cost of funds may go up for non-prime lenders,'' said Rob McLister, founder of RateSpy.com.

A spokesman for Home Capital said in an email that the company will not "speculate'' on the matter.

Home Capital's main competitor in the space is Toronto-based Equitable Group Inc. The lender did not immediately respond to a request for comment on how Home Capital's woes may impact its business.

If borrowing rates in the subprime mortgage market do rise, McLister said the increase is not likely to be long term, especially if Home Capital manages to secure a buyer rather than having to face liquidation.