Mortgage News
Flaherty Tightens Mortgage Rules – how the rules affect us
Like TMG’s President Mark Kerzner discussed in an earlier blog of mine, the Fed’s have made some changes to the Mortgage Rules in Canada. No, they opted not to hit the buyers with increasing down payment requirements for owner occupied, and no they did not reduce the allowable extended amortizations. Amid rumors of an American-like Housing Bubble that all the experts deny, including Finance Minister Jim Flaherty, these changes are set in place to appease the big banks who are pushing for tighter Government backed mortgage insurance programs.
“There are no definitive signs of a housing bubble,” Mr. Flaherty said. “We think we’re being pro-active in the three steps we’re taking today.” Flaherty said. “Our government is acting to help prevent Canadian households from getting overextended.”Everyone loves government telling us what we can and can’t do. I wonder why the banks don’t just adopt their own policies – they have the power to make whatever rules they want to for their borrowers. Why? They don’t want to be the bad guys, they want the rules the same across the board so that the playing field is even. Then they can blame the government and not themselves. Makes sense from a business perspective and quite honestly these changes will not affect the majority of Canadians.
Who will these changes affect?
It will begin to affect the renters who do not own. When investors cannot continue to own rental property, the rental pool of available housing diminishes substantially. When you have a rental pool of vastly diminished rental property, you see rental rates sky rocket. It’s all a vicious circle. When one group benefits and is “safe” the next group suffers and can potentially become victims.
The changes are:
- All variable rate mortgages acquired by Canadians must be qualified based on the five year fixed rate – no mention if it is the POSTED rate or the lowest discounted rate
- Refinances allowed only to 90% of the value of your home
- All rental properties must have a 20% down payment – its funny it says “all government backed mortgage-insurance on non-owner-occupied property”. Considering that there is no reason for mortgage insurance when you put 20% down, this is kind of redundant…
Now we sit back and watch a new “bubble” form with Canadian renters unable to find suitable property they can afford.
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