No more 30 year mortgages.

..well that headline is a little misleading, you’ll still be able to get a 30 year mortgage but you better have a big down payment. No more 30 year mortgages for CMHC insured mortgages.

The country’s biggest banks were caught off guard on Wednesday night as the Department of Finance prepared to clamp down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.

Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property’s value, down from 85 per cent.

The moves are designed to cool the housing market and limit the record levels of personal debt Canadians have amassed in recent years. Figures from Statistics Canada show the average ratio of debt-to-disposable income climbed to 152 per cent, up from 150.6 per cent at the end of 2011. A rise in interest rates or further job losses could put some households at financial risk, endangering any economic recovery.

So we’ve come circle with mortgages going from 25 year, cranked all the way up to US bubble style zero-down 40 year mortgages and then ramped back down over the last few years to a maximum 25 year amort. It will be very interesting to see what this does to some of Canadas overpriced markets.

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Moe Szyslak
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Moe Szyslak

Also in the G&M article:

“Ottawa will announce two other changes, according to a source. It will no longer allow high-ratio mortgages over $1-million, and it will cap the gross debt service (which looks at a consumer’s total debt payments as a percentage of their income) at 39 per cent.”

Am I reading the first part right? Does this mean there is a $1M cap on CMHC mortgages? That should kick Vancouver RE right up the arse, I’d say.

Still would like to see increase to the DP requirement.

VCI Admin
Admin

Gresko/Trump is banned for crapflooding comments, that’ll work till they switch IP addresses or get bored of trolling.

Stucco
Guest
Stucco

@Moe Szyslak: I can’t believe they ever permitted cmhc insurance for $1 mil mortgages.

Moe Szyslak
Guest
Moe Szyslak

@Stucco:
It seems unlikely that there are people out there buying >$1M properties with less than 20% down and having sufficient income to finance the rest. This is a small number of people (most likely RE agents/investors/flippers). But I think just the perception alone of a $1M limit is good enough to put the scare into people.

VMD
Member
Back in late Feb, I made a prediction on the Chinese forum re: 8 possible routes Flaherty will tighten lending. I predicted Flaherty will take at least one of the following steps to cool the market in March. – Well, my timing’s off by 3 months but otherwise they were quite accurate. In fact ~5 out of 8 came true : ) From most likely to Least likely: 1. Decrease amortization period from 30 to 25 years (Check!) 2. Tighten stated income/self-employed mortgage/HELOC (Check!) 3. Again decrease max re-financing amount from 85% equity to 80% (Check!) 4. Increase banks’ capital/liquidity requirement – likely done in background/stealth (via OSFI? Half-Check?) 5. Increase min down payment from 5% to 7.5-10% (nope) 6. Increase CMHC insurance premium (coming soon?) 7. Place CMHC cap on max insurable home value, such as $800k. ($1M, Check!)… Read more »
d
Guest
d

@VMD

so how will these changes affect Vancouver housing price?

Meh
Guest
Meh

@Stucco: Even worse, people who aren’t even Canadian citizens getting those million dollar plus CMHC mortgages.

Existing requirements: http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/hopr_001.cfm

patriotz
Member

@Meh:
Why should you have to be a Canadian citizen to get CMHC insurance? You don’t have to be a citizen to receive any other government service. Permanent residents have the same obligation to pay taxes as resident citizens and they are entitled to the same services.

That’s not a defence of CMHC, but of equal rights for permanent residents. Except to vote of course.

Meh
Guest
Meh

@patriotz: Permanent residents can’t hold Canadian passports or serve in our military either. If someone is a citizen, I believe they are less likely to flee the country to avoid their debts.

patriotz
Member

@Meh:
“If someone is a citizen, I believe they are less likely to flee the country to avoid their debts.”

Based on what evidence? Anyway, fleeing the country to avoid your debts went out with debtors prisons. People just declare bankruptcy.

Anonymous
Guest
Anonymous

Anyone think these moves coinciding with a few weeks after announcement of a massive stimulus in China is not entirely by accident? I do.

registered
Member
registered

8 patriotz: CMHC mortgage backing expands the definition of ‘right’ past any reasonable point. I don’t consider it a right for citizens, much less foreign residents. It should be a social assistance program for the bottom income percentiles tailored towards maximizing social stability, it became a political sop for voters and campaign contributors and the most demented, over-leveraged means to enhance government revenue in the short term this country will probably ever see. The profit delusion is why the feds are happy to issue insurance to anyone with a pulse.

patriotz
Member

Be very afraid of the Canadian housing bubble

I want you to be afraid. Very afraid of the Canadian housing market.

I want people who are considering buying a house in Canada to be the most frightened. People who just bought a house also have every right to be nervous.

Yep.

Unlike in the United States, it is very hard for Canadians to walk away from their mortgage responsibilities.

Gee and it started out so well. Yet another commentator who doesn’t understand that most US states, including Florida, are recourse like Canada.

I don’t want to become famous for predicting a bubble in the Canadian housing market. I will forego the honours. Because of my fear, I don’t want it to happen at all.

We’re not predicting a bubble either. We’re saying there is one right now.

But all in all, good stuff.

patriotz
Member

@fixie guy:
“CMHC mortgage backing expands the definition of ‘right’ past any reasonable point. I don’t consider it a right for citizens, much less foreign residents.”

I’ve already said that I would like to see it scrapped altogether. What I said is that permanent residents have the same right to whatever programs government offers as resident citizens, because they have the same obligations.

patriotz
Member

How Jim Flaherty’s new mortgage rules will sink house prices

I love the smell of burnt toast in the morning.

gordholio
Member

Just watching the speech. Flaherty’s justifying dropping the max number of years by saying it will help Canadians pay down their mortgages faster and thus build equity faster. HA!!! Where the hell was *that* logic when he brought the 40-year mortgage came into effect?

Also this: We’re “committed to the long-term stability of the housing market.” Hmm…when did they adopt *that* philosophy?

Was also watching Kevin O’Leary on the CBC news station this morning. Says he agrees with the new moves, but adds that the taxpayer should no longer be on the hook for high-risk mortgages. Couldn’t have said it better myself.

One final thing: Going forward, government mortgage insurance will be limited to homes valued under a million bucks. Me likey.

Anonymous
Guest
Anonymous

July 9th, all provisions require binding sale/refi agreement before then or new rules apply. No preapprovals past then under old rules. It appears the previous implementation with 60 day warning caused too much activity last time, now there is no room for being nice.

$1mm cap
39% gds 44% tds: um, what was this before ?!? 😯

patriotz
Member

@gordholio:

Was also watching Kevin O’Leary on the CBC news station this morning. Says he agrees with the new moves, but adds that the taxpayer should no longer be on the hook for high-risk mortgages. Couldn’t have said it better myself.

We have been saying it better ourselves, because were were saying it back when the bubble could have been defused without a massive US-style bust. Unlike Mr. O’Leary, who has never hesitated to open his mouth about any topic under the sun, but has never publicly stated that there is a housing bubble in Canada.

jesse
Member

@gordholio: “but adds that the taxpayer should no longer be on the hook for high-risk mortgages.”

Haha, O’Leary should look south of the border for an indication of how feasible that is. He should have been saying that back in 2006 when people here were warning of the advent of a speculative bubble instead of after it was too inflated and obvious to ignore. Too late Kevin.

jesse
Member
gordholio
Member

18, Patriotz: True, of course. But like I mentioned just now over at VREAA, maybe we bears/realists should lower our cynicism level a wee bit. Obviously, the situation should never have been allowed to get this far out of control. But it did. And now, in so many ways, we seemingly have the beginnings of a return to normality.

We can (and lord knows all of us have) condemned the forces that brought it to this point. But *some* of the onus must be on the buyers themselves – the people who bought at or near the peak and then treated their home like their own personal lender, with no hope of ever being able to pay their debt.

One year ago, the madness was topping. Today is an entirely different situation. I’ll take now anytime.

gordholio
Member

20, Jesse: I see you echo Patriotz’ thoughts on O’Leary. Fair enough. Clearly more people should have been speaking out publically, the government should have bene doing more, the media shouldn’t have been such lying scum, etc, etc.

But on a morning when prices are already taking a hit, where inventory is already growing, where the “bubble” is acknoweldged far and wide, and where new rules are tightening the screws even further, I’m personally looking forward rather than staring into the rear view mirror. I’ve fought with enough people on this – today, in the absence of Cam Good helicopters and 24/7 RE cheerleading and (so far) Global lies, is comparatively a very good day.

patriotz
Member

@gordholio:
“But like I mentioned just now over at VREAA, maybe we bears/realists should lower our cynicism level a wee bit.”

With respect to O’Leary – not one notch. Remember he is being paid by our tax dollars – probably more than Tsur Somerville – to represent himself on TV as an “investment guru”.

jesse
Member

@gordholio: “I’m personally looking forward rather than staring into the rear view mirror”

Well then when you hear Mr. O’Leary prognosticate over earnings projections, economic prospects, or any other macrotourist trains of thought, perhaps you need to consider his track record on one of the most obvious burgeoning problems Canada has been faced with over the past few years.

Makaya
Member
Makaya

All changes to take effect on July 9! That’s pretty fast. Somebody’s in a hurry?

http://business.financialpost.com/2012/06/21/ottawa-cuts-mortgage-amortizations-to-25-years/

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