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.

91 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
beatstreet
beatstreet
12 years ago

…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.

beatstreet
beatstreet
12 years ago

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.

scullboy
12 years ago

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.

moldcity
moldcity
12 years ago

The Sophia will be more interesting at 50% off than it is at 5% off.

ulsterman
12 years ago

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.

Re-diculous
Re-diculous
12 years ago

Wow….a jump in inventory to 19,251, increase of 232 in one day. Sales-to-list at a mere 24%.

stagnate
stagnate
12 years ago

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.

Michael Randallbard
12 years ago

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.”

Drachen
Drachen
12 years ago

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…

Booya
Booya
12 years ago

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/joyoftech/joyarchives/

patriotz
patriotz
12 years ago

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.

Time
Time
12 years ago

Scoop,

Thanks for the link

bdk2
bdk2
12 years ago

BDK,

Thanks for the direction now it's easy to reach there to watch the construction process.

scoop
scoop
12 years ago

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?

beatstreet
beatstreet
12 years ago

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.

-A-
-A-
12 years ago

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

betamax
betamax
12 years ago

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.

informer3
informer3
12 years ago

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

Time
Time
12 years ago

^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… Read more »

moldcity
moldcity
12 years ago

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!

-A-
-A-
12 years ago

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

richard
richard
12 years ago

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?

pricedoutfornow
pricedoutfornow
12 years ago

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.

Vanman
Vanman
12 years ago

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,… Read more »

Alistair Cookie
Alistair Cookie
12 years ago

@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.