Gov kills 40 year zero down mortgages
Looks like the Canadian government is starting to heed the US housing market lesson – the Federal Government will no longer guarantee 40 year or zero down mortgages. The new limit will be a 35 year maximum term and a minimum 5% down payment will be required on all new federally guaranteed mortgages.
The federal government will no longer guarantee 40-year or zero-down mortgages in an effort to avoid a housing crisis like the sub-prime mortgage meltdown experienced in the United States.
In an announcement released today, the government said government-backed mortgages would require a minimum down payment of five per cent and a maximum amortization period of 35 years. The borrower would have to have a consistent minimum credit score and there would be new loan documentation standards.
“Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” a release issued by the federal Department of Finance said.
The new rules will take effect Oct. 15, 2008 to allow existing mortgage pre-approvals to be used or expire.
So get out there and get your 40 year zero down mortgage while you can, these things are destined to become collectors items! My guess is we’re about to find out how thin of a speculative margin has been driving the Vancouver real estate boom.
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John Says:
July 9th, 2008 at 3:08 pm
Vancouver’s condo market continues to be one of the most robust in the nation. This red hot market will not be affected one bit by the reduced amortizations because in this financially conservative country hardly any purchasers were using them in the first place. Downpayments continue to be high. The olympics are near and the real estate market abounds.
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M- Says:
July 9th, 2008 at 3:09 pm
I can’t believe my eyes. It’s rather amazing. The government is exercising common sense! A little late, but still.
This will be the death-knell of the market. As interest rates rise for existing owners, they won’t be able to rely on a refinance into a 40-year amortization as a backup plan.
Wow.
And 5% down– that’s amazing. Actually requiring people to have some skin in the game.
I think this will be like the equivalent in the US when, practically overnight, mortgage lenders stopped issuing subprime mortgages.
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exx Says:
July 9th, 2008 at 3:15 pm
.nhoJ ,tcerroc yletulosba er’uoY
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Drachen Says:
July 9th, 2008 at 3:16 pm
John
Wow… Every word is false. How can you be so consistently wrong?
I don’t think changing from 0% to 5% and 40 to 35 will have a huge impact but the market was stretched to the breaking point anyhow, it was already collapsing, this will just speed things up a little.
However, we are not “fiscally conservative”, especially in BC where the savings rate has been negative for years.
The market is not “Red hot” in fact it’s been in a slump since January.
Last time I checked “Robust” did not mean overpriced and unstable with ballooning listings and limp sales.
I don’t have a figure handy and I don’t know how you define “high” in terms of down payments but I suspect if you were to define it and we looked at the numbers you’d be way out there too.
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John Says:
July 9th, 2008 at 3:20 pm
It’s simply impossible to explain to you how wrong you are. This is the best place on earth. Vancouver is teeming with rich Albertans and Asians flocking here for the spectacular weather and the Olympic games.
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Mr. Simpleton Says:
July 9th, 2008 at 3:26 pm
John,
I agree with you wholeheartedly!
The exclusive membership to the Best Place On Earth is expiring soon!
Everyone, get in while you still can!
Last chance to own the Piece of Paradise.
Only until October 15!
And to make it even more special it is my birthday!
OMG, gimme some more kool-aid!
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M- Says:
July 9th, 2008 at 3:26 pm
I wonder whether the private mortgage insurers will continue to offer zero-down 40-am mortgages, or if they’re required to stop selling those as well… Or whether, now that CMHC has pulled back, they’ll feel freely able to eliminate those risky products from their portfolios…
Incidentally, from the G&M’s article on this issue, it also sounds like the government will tighten up rules on income documentation, so no more liar’s loans.
http://www.reportonbusiness.co.....iness/home
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finklebean Says:
July 9th, 2008 at 3:45 pm
John,
Now that we’ve seen your ’stupid’ act show us your ‘got a brain in my head’ act.
Cute routine but not very original.
Every Tom, Dick and Harry is named John.
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Anonymous Says:
July 9th, 2008 at 3:50 pm
#8 do you have any idea what is bean?
hint,that can be found between pink lips!
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pricedoutfornow Says:
July 9th, 2008 at 3:54 pm
Stupidest sentence in the article: “reduce the risk of a U.S.-style housing bubble developing in Canada” Whoops! That’s like closing the door after the horse has left the barn. Yep, it’s all downhill from here. I went to an open house last weekend and as part of the info sheet on the property was a calculation of the mortgage payments. The fine print read “based on 40 year mortgage” and 0% down was an option. Still, the monthly payments were astronomical. Guess now they’ll be even more astronomical. Need I tell you that we were the only ones there?
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Rock Says:
July 9th, 2008 at 3:55 pm
John, you must be a realtor. I forgive you. But this straw, is more like a bamboo pole to the back of the RE market in Vancouver, where the masses can’t afford RE without resorting to 40 years, and most importantly, few will have enough to meet the 5% down and 45% max Debt-service ratio. There goes the speculators.
We’re done.
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Noname Says:
July 9th, 2008 at 4:03 pm
Can you guys stop ignoring John?
Here is clearly a bear reiterating all the realtor BS out there for the sake of some fun.
Noname
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Noname Says:
July 9th, 2008 at 4:12 pm
Meant to say ’start ignoring’…
Noname
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BBY Says:
July 9th, 2008 at 4:20 pm
Too little, too late.
The markets are cooling without this legislation. Closing the doors after the horses, cows and piggies have all left the barn.
I really think they should have clawed back the amortization to 30 years. 35 years is still fiscal suicide, especially with a deflationary future. But I guess they’re trying to balance out the effect of the carnage when the overextended renew post Oct 15, with overdue fiscal prudence. I think the minimum down payment should be 10% as well. Typical watered down Canadian governance, when stronger, or at least adequate, measures are needed.
However, this can only hasten the crashection to sustainable fundamentals our hot RE market needs. Bring it on. Let’s rip that band-aid off instead of teasing it off one painful leg hair at a time.
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Chincy Says:
July 9th, 2008 at 4:21 pm
TIMBBERRRR….and they all fall down.
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Anonymous Says:
July 9th, 2008 at 4:21 pm
*rips off mask*
“It’s the speculator!!”
“Yes, and I would have gotten away with it if it weren’t for you meddling feds!”
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Spincycle Says:
July 9th, 2008 at 4:22 pm
Don’t worry everyone, its perfectly normal to remove the landing gear before a soft landing.
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BBY Says:
July 9th, 2008 at 4:41 pm
Now, could somebody please raise the mortgage rates to really give this snowball a good push down the hill (over the cliff?)… Let’s get it started, oh yeah…
PS. These are some of the funniest comments posted. It’s bring’in tears to my eyes… removing the landing gear for a soft landing… If it weren’t for you meddling feds… LOL priceless.
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cashisking Says:
July 9th, 2008 at 4:43 pm
Sir John Templeton RIP July 8/08
One of a few godfathers of investment management – google him
“the most dangerous words in investing, this time it’s different. Over long periods of time, asset classes demonstrate a consistent set of return characteristics. Over shorter periods they may deviate from expectations, sometimes even by a wide margin, but over the long term historical returns, risk, and correlations are a reasonable guide to future values.”
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Time Says:
July 9th, 2008 at 4:45 pm
HANG ON BEARS 35/5 DOWN MAKES A GOOD CASE HERE.
Bencmark appreciation value over three year:
Detached 43.6% Attached 43.1% Appartments 48.5%
40/0 down start around 2005 it’s not clear whether buyers who used this product were paying some down payments because the amount to get rid of cmhc is equal to 20%.
If you look at the appreciation value over three year then those buyers had submit almost 20% equal to the size of their down payments every year without having to pay a penny from their pockets-if they did not pay otherwise that would increase their size of down payments,if those buyers still holding their units the size of their down payments are equal to 45% in last three year.
Now when the boom is cooling off so it’s not bad to ask the buyers to pay some of 5% down this same 5% could be equal to the remaining 5 year term so the term get back to 35 year.“this new provision is just (cool),(light),just cool light’n'easy ahahaha sprite or seven up”-smart move.
http://www.realtylink.org/hpi/.....YPE=buyers
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Joe Stalin Says:
July 9th, 2008 at 4:47 pm
Thanks Gordo for ruining affordability for all the poor working families in BC. As usual Gordo and his cabal of rich executives have ruined any chance of a working family to own their own home.
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paulb Says:
July 9th, 2008 at 5:49 pm
I know people that thought the trend would be even longer terms like 50 years etc.. This will kill all those hopes.
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John is Scrastic, People Says:
July 9th, 2008 at 6:03 pm
Yeah, see my name?
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John is Scrastic, People Says:
July 9th, 2008 at 6:03 pm
Yah, my name should have said “sarcastic”. Ah, those parents…
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BBY Says:
July 9th, 2008 at 6:06 pm
#22 paulb Says: “I know people that thought the trend would be even longer terms like 50 years etc.. This will kill all those hopes.”
What kind of people would hope for a 50 year mortgage?!?! If I “thought the trend would be even longer”, it would be a fear, not a hope.
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JB Says:
July 9th, 2008 at 6:10 pm
It was getting ridiculous. Let’s see, I’ll will the mortgage to my great great grandson honey…. hope he has a job.
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Re-diculous Says:
July 9th, 2008 at 6:18 pm
Surely the most significant news in all this is the new restrictions on debt-service ratio. As reported on Garth’s site:
…here’s the blockbuster – a max of 45% for a borrower’s debt-service ratio. This is not the best news in, say, Vancouver, where people have routinely been forking over 70% of their income for the privilege of living in a deflating bubble.
Doesn’t this practically eliminate the market in Vancouver overnight?
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Vansanity Says:
July 9th, 2008 at 6:26 pm
#16 – LOL!
Anecdote: A friend of my gf’s boss bought a condo d/t investment property. He’s a foreign investor currently resides in the Caribbean. Here’s the timeline:
Bought for $630K – 2007 – Presale
Put it up for sale in March/08 for $800K – No bites
Reduced to $790K – no bites
Reduced again to $730K – still no bites
He’s probably spending $3K(+) per month on it while it sits on the market.
Another owner in same building delisted because he can’t compete with that price.
Oh, also the guy bought another presale in Yaletown. The H&H building… ring a bell? Yep, they are in receivership right now, trying to sell the remaining presales to get enough $ to complete it. He doesn’t know about that yet. Durr!
That’s the way speculation bounces!
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Johns pulling your wire Says:
July 9th, 2008 at 7:22 pm
Vancouver’s condo market continues to be one of the most robust in the nation. This red hot market will not be affected one bit by the reduced amortizations because in this financially conservative country hardly any purchasers were using them in the first place. Downpayments continue to be high. The olympics are near and the real estate market abounds.
Thanks for the laugh, John. We need a little humour to lighten things up. Sometimes we take ourselves too seriously. Looks like you caught a few people up! Well done!!
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My brother says Says:
July 9th, 2008 at 7:26 pm
According to a friend’s boss who has done an exhaustive study of how the market reacts to the Olympics: it is a proven fact that the market will peak next year. So never mind all the facts that you guys are making up, it doesn’t make any difference to what will really happen. Think “next year”, “next year”. You may as well shut the blog down for a year. Right, John?
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My brother says Says:
July 9th, 2008 at 7:29 pm
July 2007 SFH average for Calgary was $505k+.
July 1-8, 2008 SFH average for Calgary is $452k+.
Difference roughly $52K.
June 2008 SFH average for Calgary is $473k+.
Difference roughly $32K from July 2007 peak.
These are big haircuts.
Coming to a city near you.
It will be interesting to see how the month of July ends in Calgary.
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patriotz Says:
July 9th, 2008 at 7:38 pm
This is not the best news in, say, Vancouver, where people have routinely been forking over 70% of their income for the privilege of living in a deflating bubble.
Well no they haven’t. The median income household has not been buying the median house with little or no DP.
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Dignan Says:
July 9th, 2008 at 8:46 pm
Last year when rates were climbing there was a surge of sales through the summer and fall while pre approvals for lower rates were being taken advantage of.
That was last year and we were in a sellers market.
The buyer was the one feeling the pressure to get in before it became more expensive.
Now this summer things are different.
We are clearly in a buyers market and sellers are being pressured to drop prices to make the sale. I think we could conceivably see sellers panic more than buyers this time and start to see some serious downward pressure on prices. We aren’t the only ones seeing prices drop and the market weaken. EVERYONE I talk to is seeing the same thing.
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-A- Says:
July 9th, 2008 at 9:08 pm
Okay, let me get this straight.
This will prevent a housing bubble from forming in Canada?
If only the Americans had mastered monetary policy as we have, they could have avoided the whole mess.
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Big Crash Says:
July 9th, 2008 at 9:21 pm
What are you waiting for, go buy yourself a house/condo before the deadline and witness “How to lose 5% of your downpayment in 3 months ”
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Big Crash Says:
July 9th, 2008 at 9:25 pm
Here comes the first panic wave… Uh, oh…
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van-zee Says:
July 9th, 2008 at 9:33 pm
Last call!
The bar will be closing on Oct 15.
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blueskies Says:
July 9th, 2008 at 9:45 pm
Here comes the first panic wave… Uh, oh…
more like scarfing down that bad burrito….
two exits! no waiting!
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Asun Says:
July 9th, 2008 at 9:51 pm
Is this the first wave of panic? If you can fog a mirror, you can be a greater fool too!
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L Says:
July 9th, 2008 at 10:35 pm
So will there be buyers rushing to get in 0down before the new rules go into effect?
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wizardofozziejurock Says:
July 9th, 2008 at 11:34 pm
Now we have the giveaways…these realtors must be reading from old scripts borrowed from their US colleagues:
http://tinyurl.com/Van-East-Giveaway
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patriotz Says:
July 10th, 2008 at 12:35 am
1 bed suite in basement currently rented $1200 per month
Would that be based on the hourly rate?
Craigslist has $1000/month and less for 2 bedrooms in that area.
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bcubbins Says:
July 10th, 2008 at 12:39 am
Note that the directive and announcement came from the Ministry of Finance. Sounds like CMHC just got its hand slapped.
This might not have that much affect on the market if private insurers take up the slack. But at least taxpayers will no longer be on the hook for the riskiest loans.
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patriotz Says:
July 10th, 2008 at 1:48 am
Actually they will be, it’s just that the riskiest loans will be 5%/35y rather than 0%/40y.
It’s my understanding from other posts that due to CMHC backstopping of private insurers, they are also precluded from insuring 0%/40y. And NFW are non-bank lenders going to loan 0%/40y without insurance or added security, whatever the rate. Not in BC anyway.
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Alistair Cookie Says:
July 10th, 2008 at 7:07 am
This is an overall good step towards ensuring better fiscal sanity from buyers in the BC market. It is too little to late, but at the same time it will at the very least save a few of the GF’s who still have no clue. I’m still coming across people who are buying now?!?
That said, without these GF’s the market here will accelerate it’s declines in price and sales.
There really is no way that the MoF could change the lending standards any faster as this would cause an outright crash this minute, and I’m certain that they wish to avoid as much blame as possible. Further, we probably won’t see any further changes other than minor tweaks as those who do manage to keep their negative equity homes will have to bring cash to the bank when the mortgage is due in 5 years or so.
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Chincy Says:
July 10th, 2008 at 7:27 am
What’s that old saying…the (Vancouver) market can stay irrational longer than most can stay solvent…for those that don’t ive here, there is soooo many condos just getting finished that are going to hit the market…for some folks, I believe what is coming will put them bc 10-15 years.
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patriotz Says:
July 10th, 2008 at 7:45 am
those who do manage to keep their negative equity homes will have to bring cash to the bank when the mortgage is due in 5 years or so.
I think we’ve gone over this before, the banks don’t really care about the equity situation on insured mortgages because CMHC is holding the bag, not them. The insurance is good for the entire amortization period.
They just want their cash flow and they lose, not gain, if they don’t renew and force the property into foreclosure. I have never heard of it happening in previous busts.
What is likely to be the real problem is if interest rates are up at renewal time, the house has negative equity, and the owner can’t, or doesn’t want to, carry the increased payments. Also walkaways before renewal time as we are seeing in the US.
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Jari VW Says:
July 10th, 2008 at 8:01 am
The people in control of the market are not stupid; they were totally aware of the consequences of relaxing the mortgage market. They deliberately loosened the lending standards, in order to bring the property prices up.
Recently these insiders saw that the prices are flatlining, so they rushed to sell their properties at max price. Now after thay have cashed in, they deliberately reverse the mortgage market to hasten the decline in prices so that they can buy their properties back with discount.
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Anonymous Says:
July 10th, 2008 at 8:10 am
There used to be a list of ongonig GV condo projects – has that thing disappeared or have I just lost the link? Wondering if it isn’t time to start offering 40% off offers to projects that haven’t sold out…
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Van Man Says:
July 10th, 2008 at 8:19 am
I asked my bank manager about the 40/0 and how popular it was way back in 2006 and 2007 and she told me that, while some people went with that option, the rest went with a conventional mortgage, meaning paying up the 20% downpayment to avoid CMHC. So really and like the US Subprime, it’s really a very low percentage when it comes to the overall mortgage scene. Having said that, it doesn’t take a lot of default to scare people away from buying a home either as witnessed in the states.
The problem is this. Home prices had gone out of whack. Conventional wisdom states that when interest rate goes down, the PE ratio of stock should go up, which means prices should go up. But it didn’t. PE ratios of US major corporations in fact are at their 1994 lows. The economy is teetering on a brink of a recession and yet people still expect prices to keep going up. How logical is that?
There is price based on fundamentals and there is price based on expectation. Vancouver prices had been priced based on expectation rather than fundamentals and neither a 40/0 nor the new 35/5 will make any difference. When people want it, they will pay any price.
I think people here should stop calling us bears, because I’m sure many of us here have the ability to afford the 20% downpayment already.
In fact, having a 20% downpayment means that the buyer had planned to buy only at the right time. Why else would he or she save up the 20% in the first place. You can’t even see the cash these days. It’s in a bank somewhere. All you see are numbers on your computer screen — big deal and nothing to write home about.
I rather have a life, see my wife and kids or for others have fun with their friends and significant others.
The key is a plan. 35/5 or 40/0 means the person has absolutely NO PLAN whatsoever buying a house.
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Warren Says:
July 10th, 2008 at 8:57 am
Cam Muir is on CKNW with Bill Good right now. Lots of callers are questioning Muir’s statements of “no sub prime here”. All of the sudden people are coming out of the woodwork saying that our problems are similar to US Sub Prime, long denied by Muir and people like him.
Somebody asked him point blank if it is a good time to buy, and his typical “its always a good time to buy long term” is still alive and well.
Spin spin spin!
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betamax Says:
July 10th, 2008 at 9:07 am
The people in control of the market are not stupid
Of course they are. No need to assume malice when incompetence will do.
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RJB Says:
July 10th, 2008 at 9:24 am
Sub-prime is used to distract people from the fundamental problems with real estate prices throughout the world.
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bcubbins Says:
July 10th, 2008 at 9:36 am
It’s my understanding from other posts that due to CMHC backstopping of private insurers, they are also precluded from insuring 0%/40y.
—–
Patriotz, I don’t know much about this mortgage insurance market so maybe you could expand on your comment. But I thought the private insurers introduced 0/40 mortgages before CMHC, so why would they have to stop??
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blueskies Says:
July 10th, 2008 at 9:45 am
MSM gets it!
http://tinyurl.com/goingdown
oh happy day!
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bcubbins Says:
July 10th, 2008 at 9:50 am
Today’s Sun has an expanded article that answers my question…
Credit squeeze hits 40-year mortgages
All mortgages issued by federally regulated lenders with down payments of less than 20 per cent require insurance, and the government backs the insurance whether it is provided through the Canada Mortgage and Housing Corp. or private insurers, such as Genworth Financial.
So most low-down-payment mortgages will be affected, said Tsur Somerville…
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bcubbins Says:
July 10th, 2008 at 9:53 am
More from the same article…
Feisal Panjwani, a senior mortgage consultant with Invis in Cloverdale estimates that 85 to 90 per cent of his first-time buyers have chosen the 40-year option.
But most could qualify for a shorter term, he said. Instead they pick a 40-year period with lower payments so they have the flexibility to pay more than required but go back to the lower amount if they hit a rough patch, he said.
So the effect of shortening the amortization period may not be so bad. But taking away the zero-down option could have an effect on the market, he said.
“That zero-down program has been quite popular,” Panjwani said.
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Time Says:
July 10th, 2008 at 10:52 am
bcubbins,
congratulations!you have also got an answer to your own question at #54 through your own link.
Question:But I thought the private insurers introduced 0/40 mortgages before CMHC, so why would they have to stop??
Answer:government backs the insurance whether it is provided through the Canada Mortgage and Housing Corp. or private insurers, such as Genworth Financial.
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John Says:
July 10th, 2008 at 10:57 am
Prices are so cheap here in Vancouver that no one needs to use a 40 year amortization anyway. Hefty downpayments and small amortization periods are what have been keeping the Vancouver market going with such force. This announcement will hit communities like Calgary and Saskatoon where irresponsible young buyers with no money have been buying homes. Here in Vancouver, the best place on earth, future home to the 2010 Olympics everyone has been very conservative. Add in the asian and albertan investors and you have a strong market.
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patriotz Says:
July 10th, 2008 at 11:40 am
. So really and like the US Subprime, it’s really a very low percentage when it comes to the overall mortgage scene
But the majority of first-time buyers were using 40 year, which is what matters.
Whether people with existing properties stay put or sell and buy another makes little difference to the market.
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Drachen Says:
July 10th, 2008 at 11:55 am
That’s not entirely true Patriotz, a lot of people in Vancouver purchased second or third properties as “investments”.
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Alistair Cookie Says:
July 10th, 2008 at 12:06 pm
@patriotz the banks don’t really care about the equity situation on insured mortgages because CMHC is holding the bag, not them. The insurance is good for the entire amortization period.
Sorry to revisit this but… we are seeing some interesting goings on south of the border with many insurance companies close to failure: ABK, MBI, FNM, FRE to name the big ones.
So how well capitalized is CMHC? and will the government/taxpayers really back up it’s failure? I think that things have changed or will be changing, and banks may end up holding the bag. But I may be wrong.
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foo Says:
July 10th, 2008 at 12:25 pm
Alistair Cookie,
The govt explicitly backs CMHC and the other insurers. Their capitalization levels are irrelevant. This is not the US with an implied guarantee on FNM/FRE. We the taxpayers are on the hook for 100% of losses on insured mortgages.
You can also take a look at the big banks’ mortgage portfolios over the last 5 years, and you will see that they have barely grown. The banks have been securitizing the mortgages they issue as fast as they issue them. Better hope you don’t have any REITs in your RRSP…
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Alistair Cookie Says:
July 10th, 2008 at 12:31 pm
@Drachen a lot of people in Vancouver purchased second or third properties as “investments”.
And they’ll loose just as much money whether they had 40 year or 25 year mortgages.
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Alistair Cookie Says:
July 10th, 2008 at 12:34 pm
@foo
Thanks foo!
Better hope you don’t have any REITs in your RRSP…
I did in the ‘good’ years!
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Vanman Says:
July 10th, 2008 at 12:37 pm
But the majority of first-time buyers were using 40 year, which is what matters.
Whether people with existing properties stay put or sell and buy another makes little difference to the market.
Patriotz,
I think you are confusing first-time buyers with RE investors. While first time buyers did opt for the 40 AMS with zero down, their numbers aren’t huge. I think the total percentage overall for all subprime time borrowers in Canada is under 4%, something less than 3% in the US.
What’s true and I suspect that most of these loans go out to are people who siphoned off equity from their principal residence, went out and bought multiple units for investment or rental income purposes. The fact of the matter is, the government is worried that rampant borrowing to speculate on this asset class may lead to greater government liability. And besides, any mortgage with less than 20% downpayment requires CMHC insurance. You got to ask the question. How many of those condo units are paid down with 20% or more in downpayment.
The problem with price reduction is that, price doesn’t have to go down to 20% for a person to loose all of his downpayment. If he or she has a 7% mortgage plus other expenses, it only takes about a 10 to 13% price reduction to put the person in question into negative equity. And for those who uses zero down or even a 5% downpayment, negative equity for them has already come and gone. They are negative, but it’s just a matter of how bad prices can keep going down before they decide that walking away and financing the difference or even declaring themselves bankrupt would be a better choice. Judging from the reaction from our Federal Government with its 35/5 policy implementation, it really means that price reduction will become a reality. They too can do the math as well as any other savvy investor.
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Alistair Cookie Says:
July 10th, 2008 at 12:44 pm
@foo The banks have been securitizing the mortgages they issue as fast as they issue them.
How are these securities held, who has rated them, and who are the ‘ultimate’ bag holders? Sorry, but my knowledge of Canadian banking is limited.
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Vanman Says:
July 10th, 2008 at 12:50 pm
Buying a home is a good long term investment if you,
1, Pay down the debt in a quick and timely fashion (interest is the killer deal, so short amortization period is best.
2, Use a conventional mortgage, which means a 20% or more downpayment. The more the better, ofcourse your commitment to your property increases too! Like they say, SHOW ME THE MONEY!
3, Low loan to value ratio. Simply means, pay at market fundamental prices with a huge downpayment and your mortgage and AMS period will be lower as well.
4, Mortgage+expenses+insurance are lower than your typical rent paid out.
5, Location,location, location. Sometimes, your dream home is situated at a location you like, no other home has that same plot as yours. Which means, somebody else will realize this value potential in the near future too!
Unfortunately, you may have to pay over a bit even during a downturn. It’s like buying a bluechip company. They may be down, but they still command a price. Whereas small cap companies may drop even further..
All in all, buying a home in Vancouver is a good long term investment if you buy into it prudently.
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pricedoutfornow Says:
July 10th, 2008 at 12:53 pm
Oh goody, they’re discussing this issue on CBC radio with a mortgage broker. She said the economy here in BC is very strong, incomes going up, population going up, no need to worry about prices going down! Oh boy I’d better call the bank and get pre-approved!
Garbage like this sure makes you feel like crap eh? Better change my name to pricedoutforever.
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richard Says:
July 10th, 2008 at 3:58 pm
ctv thinks cracks in housing market behind new mortgage rules.
garth turner says “This pulls the plug right out of the bubble, but it does it in a way that inflates the bubble another few months,”
i wonder if it will… or will everyone hold back?
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-A- Says:
July 10th, 2008 at 4:29 pm
One of the overused talking points made by the Re pimps was that BC’s high housing prices were supported by fundamentals such as a strong economy, and of course also the rich foreigners, and not by cheap money.
We will soon see, although, a 35 year mortgages and 5% down is still lax.
If this doesn’t spur sales in the short term, it will be an indicator how dry the well of greater fools really is.
Believe or not in my circle the believers were expecting a 100 year mortgage to be introduced in Canada. They reasoned that would be the only way those who were priced out would be able to afford a home, yes the popping of the bubble was not a possibility-not in “the best place on earth, where the Olympics are coming
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moldcity Says:
July 10th, 2008 at 4:38 pm
I hadn’t considered that this move would spur a short term buying spree. That would truly take the greatest fool of all, the one that sees the US example, looks at the local market data and leaps in anyways just as the last blast of air is pumped into the bubble. I guess there always has to be someone who buys at the peak!
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Time Says:
July 10th, 2008 at 4:49 pm
^Income1 Monthly Payment2 is an issue not the down payment3 alone^
Garth Turner is a brain less old man-how on the earth some one will buy million dollar house?Even five hundred thousands? or two hundred thousands appartment? because what is zero down under 20% is a government and private bussiness.”the issue for buyers is how to pay your monthly payment that will decide the buyers fate not the down payment” no buyers can be qualified unless they are able to pay monthly payment from their supporting income.
It’s been more than two year since negative headlines regarding housing sector does not match with article inside
now it’s ctv found this idiot has more value who recently purchased pent house on 36th floor in vancouver man oh man,who bought his book called”Greater Fool”Isn’t that apposite of “SMART BUYERS” Garth is in opposition-greater fool got kicked out from his parent party earlier-no?.
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informer3 Says:
July 10th, 2008 at 4:54 pm
The key thing to remember is TV Towers will go down in price at least 50% in the next 12 months. It is right near the worst corner of downtown (Dunsmir and Seymour) and too close to the downtown eastside, it’s also the bad part of robson where there are a lot of drunk people from surrey causing trouble on weekends
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betamax Says:
July 10th, 2008 at 5:03 pm
If this doesn’t spur sales in the short term, it will be an indicator how dry the well of greater fools really is.
Agree, and I suspect it is bone dry at this point.
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-A- Says:
July 10th, 2008 at 5:18 pm
Betamax, based on the recent slow sales trend, it should be bone dry.
I am surprised how “ the dogs” and the pimps, are trying to deny what the government has officially admitted by virtue of taking this step, it is actually saying “yep, it’s a bubble and our loose lending standards have caused it, but unlike the bad Americans, we won’t deny it until there is blood in the streets”
Pathetic
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beatstreet Says:
July 10th, 2008 at 6:28 pm
This is more incompetence from Flaherty. First they approve 40 year mortgages; now with an election surely on the horizon he wants to give the bubble one last blow. But, if it tanks in the fall he will say he did something….so cynical. Disgusting.
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scoop Says:
July 10th, 2008 at 6:28 pm
From the backgrounder at:
http://www.fin.gc.ca/news08/data/08-051_1e.html
“The initiative also includes minimum loan documentation standards to ensure that there is evidence of reasonableness of property value and of the borrower’s sources and level of income.”
Reasonableness of property value, good luck with that! (I know this means reasonableness as compared to market value but it struck me as funny)
Seriously though, does this mean though that there were no loan doc standards prior to this?
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bdk2 Says:
July 10th, 2008 at 6:32 pm
BDK,
Thanks for the direction now it’s easy to reach there to watch the construction process.
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Time Says:
July 10th, 2008 at 6:41 pm
Scoop,
Thanks for the link
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patriotz Says:
July 10th, 2008 at 8:27 pm
garth turner says “This pulls the plug right out of the bubble, but it does it in a way that inflates the bubble another few months,”
i wonder if it will…
This will prompt a few greatest fools to jump into the market, but for every one of them there will be ten speculators trying to get out.
Prices are already going down and they will keep going down.
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Booya Says:
July 10th, 2008 at 8:32 pm
Great video link! Well-explained, and goes a long way to demonstrating how ridiculous people’s reasoning can get when money is involved.
In that vein, here’s another take on the concept:
http://www.geekculture.com/joy...../1125.html
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Drachen Says:
July 10th, 2008 at 8:39 pm
I think the whole 40 year 0 down was just a dodge from the Conservatives in the first place, they figured there would be an election in the spring at the latest so they had to keep the bubble going until after then.
Now that it’s obvious the bubble is going to die before the next election they cut back as you say beatstreet so they can say they did something…
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Michael Randallbard Says:
July 10th, 2008 at 9:36 pm
Too good to be true…………….
From San Diego tonight
“Sales of North County homes priced $1.5 million or more crashed by 50 percent in June from the same month a year earlier.”
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stagnate Says:
July 10th, 2008 at 9:37 pm
absolutely, this is a publicity stunt by the feds/cmhc. the cmhc is not like any other quasi insurance gig; it is an unprecedented cash cow for the federal government. people don’t realize how closely the cmhc is linked to the bank of canada. money in (there’s been a lot) is pure revenue, any liabilities are easily monetized by the central bank. a no lose proposition for the government. the government doesn’t want the cmhc to come under scrutiny, ergo the distancing created by the new announcement.
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Re-diculous Says:
July 10th, 2008 at 10:21 pm
Wow….a jump in inventory to 19,251, increase of 232 in one day. Sales-to-list at a mere 24%.
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ulsterman Says:
July 10th, 2008 at 10:47 pm
I see the advert in today’s Georgia Straight for the Sophia development now has a 5% price discount. Last week’s advert just emphasized what a great deal this bankrupt development was – obviously not enough investors could see this no-lose opportunity.
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moldcity Says:
July 10th, 2008 at 10:56 pm
The Sophia will be more interesting at 50% off than it is at 5% off.
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scullboy Says:
July 11th, 2008 at 11:18 am
The Sophia would be way more interesting at 50% off and one of Krrrrrrish’s mom’s “extra double happy ending gorilla mask” massages.
Hey krrish, tell your mom I’ll be by to see here this weekend!
I think maybe she was huffing fumes from her “exotique lotions” when she was expecting krrrrish, which nicely explains his mental capacity.
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beatstreet Says:
July 11th, 2008 at 6:11 pm
Good job again Pope on selecting your articles. I hadn’t thought about it, but come to think of it, now RRSPs are safer than your house!
You don’t have to put stocks in your RRSP; you just put GICs, T-bills etc.
Unfortunately, some poor soles will rush in to “get under the wire” over the next few weeks before the 40 year rules change, mindless of the implosion that is so obviously happening to our biggest trading partner.
Thank goodness we have the seawall to protect us.
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beatstreet Says:
July 11th, 2008 at 6:17 pm
…oh does anyone not seriously believe that the recent changes to Canadian government guarantees aren’t related to the very high probably event that the big mortgage guarantors in the US are on the ropes with blood streaming down and ready to go down?
Come one bulls, let’s hear it so you have your lines ready for tomrrow’s exhibition centre tours.