If CTV, the Globe, and the Post are right, Canadians can say goodbye to:
- Refinances up to 90% LTV
(Insured refinances are reportedly being cut to 85% LTV maximum) - 35-year amortizations on high-ratio insured mortgages
(The maximum is reportedly being cut to 30 years)
These papers quote sources claiming the government will announce these changes today.
In addition to the above, the government will reportedly:
- Reduce or eliminate its backing of HELOCs.
- Leave minimum down payments as is, at 5%.
- Leave debt ratio calculations for condos unchanged as well.
None of the above is confirmed as of the time of this story. We’ll check later today if the news breaks.
The Big 5 CEOs and Flaherty must have been at Sunday Brunch together again…Fresh from the puppet strings of the Big 5 Banks, apparently they have so much concern about Canadians with mortgage debt (low cost borrowing) which requires full income qualification, yet they have no problem with their MOST PROFITABLE credit card debt at 19%+, personal lines of credit, investment loans and car loans etc. which most often require no documentation at all? News flash Flaherty and Carney, these fall under ‘household debt’ as well and sit in a ‘wild west’ category. This will cause a ripple…
What would you rather, they dissolove the CMHC and go back to bank only loans for homes (25% down, on the banks terms)? You can whine all you like, but why not offer solutions instead of being a brat?
I think the general term solution offered above was that the government should regulate the banks in unsecured, barely underwritten high interest lending as opposed to mortgages.
An additional thought, if the banks are so worried about debt, then why are they asking the government to turn around and regulate the mortgages that they are able to fund? Why don’t they just do it themselves. Perhaps they are doing it so that the monoline lenders are also affected by the rules and are forced to lose business back to the big 5, who will in the meantime happily continue giving our credit cards to anybody with a pulse, auto loans to anybody with a paystub, etc. Not sure how that is helping out Canadian debt levels…
Frustrating, every time I save up money the qualifications get tighter. Every time the qualifications get tighter I have to save more money. Every time I’m saving money the prices of properties go up. What am I supposed to do when rent is almost $1500 a month?
I don’t find it surprising at all that the banks are doing this. Most of the proceeds from refinancing goes to paying off those high interest credit cards at 19% and consolidating them into a mortgage at 3.69%. Now that you’re limited to how much equity you can pull out, you won’t be able to pay off those credit cards and will still be stuck with them at high interest rates. Who do you think benefits from that?
The reduced amortization is idiotic because it limits applicants who are perfectly qualified for a mortgage from having more flexibility with their cash-flow. Why put such a limit on the amortization when it can be renegotiated at the end of the term?
For example, a young couple who are buying their first home, even if they meet the credit and debt service ratio criteria of CMHC, would now have less flexibility managing their mortgage payments. At the beginning of their career they earn less money and require more flexibility with mortgage payments. As their earnings increase, they can handle a higher payment amount and pay off more of their mortgage quicker.
The new limits are applicable in cases where the homeowner has less than 20% equity. But what about those who have, say, 21% or 22% equity? Such applicants would not have to pay the default insurance premium and be subjected to the new rules even though their position is not all that dissimilar from those who have, say, 17% or 18% equity.
It seems that the new regulations are geared towards limiting the risk for the government (while still charging the same premium!) as oppose to addressing the root of the problem: people’s appetite for debt by using their house as a bank.
Agree Igor.
The big 5 basically own CMHC. The make teh calls. Several years ago they went crazy and bought everything and drove all the B lenders out of town. Yes the fact the B lenders could not et money was a major factor but CMHC was doing beacons in the 500″s, 100% purchase, 95 % refinance and 40 year amortization and now that the B lenders are gone they tightened up.
Ultimate goal is it drive the mono lenders out. LAst week it was Xceed. I predeict 2-3 more real soon. The mono lenders are losing money on every deal the put on the books as the Big 5 are buying business however they can afford to lose on a mortgage but make up for it with other products
What’s everyones handicapping on what the new HELOC rates are likely to be once gov’t insurance is withdrawn in April?
I think 8%.
Does anyone know if insurance will still be in force on HELOCs taken out prior ro April?
Traciatim,
Thanks for the reply, if you re-read my post a little more thoroughly, you would see that the underlying theme is the fact that they are ignoring a significant part of the root to the problem. Unsecured, high interest debt being provided by the same Banks who are offering their ‘solution’ via the Gov’t. I feel that CMHC certainly has a valuable role in providing homeownership to Canadians, not sure where your interpretation of abolishing CMHC came from in my post. HOWEVER, on that note, in the event of CMHC ever exiting the market (which wouldn’t happen due to the fact that they are a profitable gov’t entity), I can assure you that a whole host of solutions would pop up to allow buyers to enter the market with less than 20-25%. For example, and this is being done now, recall last Spring when the gov’t decided to intervene with mortgage rules and changed the requirement to 20% down payment on non-owner occupied (rental) properties. You may or may not know that some of the Big 5 would be happy to give you a mortgage for 80% LTV and enhance that with an unsecured PLC for say $30-40k in an ‘upsell’, because ‘you have such good credit…’, ‘we can see that you pay your bills…’, ‘we would like to earn you business…’, ‘perhaps you’d consider moving some of your accounts from _____ to us…’. Now, do you (A)think that the PLC is set aside for a rainy day, or (B)think that the PLC was used to essentially finance a property at 90 to 100% total leverage (80% secured with a mortgage at a low rate, 10-20% unsecured at a much higher rate). Guess who makes a larger profit from this? Does this change the amount of borrowing going on? Absolutely not. Does it change the amount of burden(costs) to consumers? Absolutely. Do the Banks make more money? Sure do! Here is my solution, perhaps greater care or attention should be placed on the un-secured high interest, no documentation required lending, rather than the fully qualified and underwritten mortgage lending. As for government intervention into mortgage lending after the ‘barn doors’ have been opened as many say, we haven’t even gotten to spillover effects of rule changes yet. Cheers!
Does anyone have confirmation that the new 30 year amortization maximum only applies to those with high ratio mortgages? Therefore, if someone has more than 20% down can still get 35 year amortization with this change? Does anyone have a link to this?
I believe the days of low rates on HELOCs as well as ARMs are numbered. Raising the cost of borrowing is truly the only effective way to get people to stop spending money they don’t have. Keep in mind some lenders have already increased their ARM rate. Credit cards at 19% provide many people with the incentive to pay their balance in full. But a credit card is an unsecured type of debt and the rate is there to reflect the level of risk. With housing prices expected to be under pressure this year and the level of personal of debt keeps rising, it’s only a matter of time before lending institutions demand a higher rate given the considerably greater risk they’re facing. That’s my view.
I have a general question…
Let’s assume prior to 2008 I have purchased a home and paid the extra .60% CMHC Premium to have the 40yr amort. Now my mortgage comes up for maturity. At most I am going to be given a 30yr amort.
Where or who should I be talking to in order to obtain a .20% refund on my CMHC premium?
Suggestions anyone… My clients are going to be asking these questions shortly!
35-yr to 30-yr should (in theory) reduce house prices by 7%.
Hang in there!
Your right Bob, I will be asking questions and seems as Mr F has done the press release but no details have been made available checking the CMHC website , gc.ca or other places with high visibility.
I sure will be looking for a refund of premiums should CMHC yank my insurance if indeed this affects existing HELOCs
LOL, Bob and Cheesed, the client can simply renew and continue on with the current am schedule. The property has been insured. No one is yanking the insurance away from existing mortgages hence no refund for existing mortgagors. These changes are for new mortgages.
Have you checked with your lender?
Once the 35yrs is off the table it is GONE for everyone…
Bob. Jason is correct. Once you have it they do not take it away. It is for new mortgages only. NO different than anyone who does a 90% refinance today. Do you think in March the banks will ask for the extra 5% back considering now they only offer 85%?
Bob are you a broker or a client?
If you can’t afford 25yr amortization, you hve too much house.
What a meaningless generalization.
I agree, once you have it the current lender will not take it away… I am talking about attempting to switch to another lender at maturity. So far one of the major 6 have told me they will have ONLY be offering 30yr amorts. of less (irregardless of what has been registered) and they are also waiting to see what they will do with No fee insured transfers with less than 85% equity. May seem like a silly question on the onset, but there is no deffinitive answer coming from the lenders at this time. I am sure it will get sorted out well before the Mar 18 date and logic will prevail (At least I hope)
Yes I am a broker and at this time I am sorry to say that I am just as much in the dark as a client…