The new lending guidelines
Those new OSFI guidelines for CMHC mortgages are still ‘coming soon’, but the Vancouver Sun has an article up outlining the current state of the guidelines and predicting they will be announced in the next few weeks.
They’ve softened some since the first concepts floated out there by OSFI, but as a batch of changes that occur all at once they still stand to have a marked impact on the market.
Here’s the list of predicted new guidelines:
. Home Equity Line of Credit mortgages reduced from 80-per-cent financing to 65-per-cent financing.
. Lines of credit to be either amortized, or amortized after a specified period of time (no more never-never plans).
. More stringent income requirements for self-employed borrowers.
. All mortgages to be reviewed upon renewal (currently as long as payments are made, it is unlikely for a bank not to offer a renewal to a client).
. Funds from cashback mort-gages are not allowed as a source of down payment (currently only a handful of lenders allow this, but it does mean that “zero down” mortgages are technically avail-able, but with some restrictions.)
. Use of the five-year posted “benchmark” to qualify uninsured terms of one to four years and all variable terms (currently most lenders use a three-year posted or a lower rate to qualify uninsured mortgage.)
. More limits on underwriting exceptions (many recent applications don’t fit the ever shrinking “boxes” with the banks, which means fewer common-sense deals will get approved.)
. Home insurance to be included in debt-servicing ratios (it is currently not included.)
. More public disclosure of statistics pertaining to institutions’ mortgage practices.
. More accountability from management to ensure lenders are adhering to their underwriting guidelines.
If these changes are implemented I guess we’re going to find out how much of our real estate market is supported by those who are stretching beyond their means.
June 20th, 2012 at 12:39 am 1
… and more toothless bluster from the powers that be. Thanks to more government guarantees (moral hazard) and lower interest rates for longer (financial repression), we’ve surpassed the United States:
http://www.doctorhousingbubble.com/wp-content/uploads/2012/06/US-vs-canadian-housing-prices.png
We’re closing in on Ireland’s peak now. After that is Spain. Go Canada!
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June 20th, 2012 at 5:32 am 2
Once listed at $429,000, Sechelt home picked up for $388,000
2010 – sold for $420,000
2011 – listed at $429,000 for 6 months, no sale
2012 – sold for $388,000
After all costs it looks like our proud owner took a >10% haircut.
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June 20th, 2012 at 5:59 am 3
1 rp1 Says: “Go Canada!”
Machiavelli’s Three Stooges apparently intend to drag Canada deeper into catastrophe pending clarity on the next election. Kiss that social safety net goodbye, proles, they need the money for the banks.
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June 20th, 2012 at 7:15 am 4
What do they mean, “amortize lines of credit, or amortize after a certain period”? I know dozens of people who have lines of credit they are basically living on-this is how they fund everything from car repairs to vacations to emergency household repairs. Some don’t even make any significant dent in the outstanding balance, it just carries on as a debt year after year after year (and often gets larger). Is this a real change that will happen? I think this would definitely hurt the economy, less consumer spending if people realized “s**t, I have to pay off my LOC within 5 years!”
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June 20th, 2012 at 7:30 am 5
a little off the topic but an interesting read I thought id share
http://finance.yahoo.com/news/net-worth-implosion-not-just-095200189.html
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June 20th, 2012 at 8:00 am 6
If the LOC has to be amortized, does that mean it closes at zero (and you have to reapply) or does the term just restart when you ht $0 overnight and dig back in the next day?
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June 20th, 2012 at 8:10 am 7
A number of these proposed new guidelines will never see the light of day (ie. review of all mortgages upon renewal…yeah sure), while those that involve the implementation of “more stringent” requirements or limits will forever remain moving targets subject to the opinion or interpretation of those who reviewing a particular individual’s financial situation. In other words, not much will change. Perhaps the Vanc Sun and the mortgage broker who wrote this article already know this and are simply sandbagging people’s expectations in advance of better than expected news as it pertains to the new guidelines. Anyway, who knows what their real motivation is here in printing such a article? Maybe this is some sort of cry for help from two parties that clearly have a vested interest in keeping the party going.
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June 20th, 2012 at 10:13 am 8
“However, the most important comments from the OSFI’s review of the feedback has been that they are likely to withdrawal the requirement to re-qualify at renewal, which has given many in the industry a sigh of relief”
Haha that was the biggest nothingburger clause of all. For those who actually paid attention, OSFI is requiring banks to periodically mark their assets to market which amounts to the same thing in terms of requalification of loans. OSFI just did an end-run around the mortgage industry, who were brilliantly distracted by screaming about the logistical morass of reQ on renewal.
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June 20th, 2012 at 10:47 am 9
@jesse: Are you talking about the “All mortgages to be reviewed upon renewal” bit? So they’ll be forced to determine the true value of the underlying asset, and put that on their books? People won’t be forced to requalify if LTV changes but the banks can’t report fantasyland values?
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June 20th, 2012 at 11:01 am 10
Yawn….
Another set of “mortgage changes” portrayed as damaging to the RE bubble…
Please see March 2011 “drastic” mortgage changes for a hint of how the new
A hint? No change….
It is pretty amusing watching us bears glom on to potential positive changes only to have our hopes dashed again and again…
Sometimes you just have to laugh instead of yelling or crying…
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June 20th, 2012 at 11:05 am 11
@jesse:
“For those who actually paid attention, OSFI is requiring banks to periodically mark their assets to market which amounts to the same thing in terms of requalification of loans.”
Not if the mortgage is insured. Remember it’s the mortgage which is the asset, not the collateral.
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June 20th, 2012 at 11:28 am 12
@Twisted Sister:
I find it odd that a number of bears have been echoing comments like this a lot lately, when all the evidence suggests that we’ve finally reached the big tipping point we’ve been waiting for.
Inventory is at 10-year highs, and has been for most of the year. Sales are at multi-year lows. Debt levels are at all-time highs. CMHC is close to its limit and refusing more and more MI applicants. Prices have stalled or dropped, and this is during prime buying season when prices usually rise. Interest rates can’t possibly get any lower.
All this recent doubt reminds me of that scene near the end of Star Wars where the Death Star commander says “Evacuate? In our moment of victory? I think you overestimate their odds!” (although to be fair, in that case the doubt turned out to be justified, but hey).
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June 20th, 2012 at 11:35 am 13
@patriotz:
Once listed at $429,000, Sechelt home picked up for $388,000
2010 – sold for $420,000
2011 – listed at $429,000 for 6 months, no sale
2012 – sold for $388,000
After all costs it looks like our proud owner took a >10% haircut.
==============================================================
Yeah and watch the new owner take a 10% haircut by Sept.2012
Sunshine Cost will be Telly Savalas country by Christmas.
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June 20th, 2012 at 11:37 am 14
Yalie @
“I find it odd that a number of bears have been echoing comments like this a lot lately, when all the evidence suggests that we’ve finally reached the big tipping point we’ve been waiting for.”
_____________
Well, for some of us long time bears who completely sat out the market, we have had more opportunities to have our hopes dashed, and they have been dashed.
The same logic of price to income ratios being skewed has been in place for many many years; the same levels of historically high homeownership rates have been in place for years (each year, that rate breaks a new historic high); each new government rule holds the promise of deflating the market only to see a “new” variable emerge (such as HAM – real or not) which re-inflates the market; we see the continued maintenance of “emergency” low rates for 4 years now, and they will likely continue for years; and each year it seams we see a flood of listings and premature listings parties only to see listing expire and drop back to season levels. Oh, and factor in ever rising prices.
Excuse me if I am a little skeptical that this is the great “tipping point” you refer to….
This tipping point has been bandied around many times over the last 6 years….
I will believe it AFTER the trend in prices declines has been annualized and not before it….screw the tipping point….
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June 20th, 2012 at 11:47 am 15
@Better get a 2nd LOC: I’m interested in this answer, too. I moved all my revolving credit to LOC and was planning on shutting down my credit cards for good, but I actually want to keep open credit unmaxed and not-often-applied for so that my Beacon Score stays really good. Y’know, just in case some day I do want a mortgage for a reasonable price.
Irritating.
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June 20th, 2012 at 11:56 am 16
@Yalie: How do you know that the CMHC is refusing more and more MI applicants?
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June 20th, 2012 at 11:58 am 17
@Yalie: How do you know that the cap on the CMHC won’t be raised? I can foresee a 2008-type scenario where our gov’t would entertain the idea of a small increase. Maybe 30-50 billion more.
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June 20th, 2012 at 12:05 pm 18
@Twisted Sister:
Fair enough, I’ve been burned by my predictions of an imminent collapse for the past 4 years, only to be proven wrong.
However, as the saying goes, “things that are unsustainable tend to stop.” The way I see it, each year that goes by is another year that the chances of the market going yet higher get smaller and smaller.
Think of it this way: Imagine playing game of chance in which your chances of winning get smaller and smaller with each “win”. You have a 50-50 chance and you win. Then you have a 40% chance and you win again. Then a 30% chance, and, voila, you win again. You can keep playing and winning this game for a while, and it might start to look like it will go on forever. But the odds keep getting worse, and eventually your luck will run out.
I really think we’re down to the 1-in-100 chance of real estate values going up from here. And, hell, they might actually defy the odds once again and do so. But one thing’s for sure: if prices don’t keep going up, they will go down. There are too many speculators in this market for it to be otherwise. And they sure as hell don’t seem to be going up lately.
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June 20th, 2012 at 12:07 pm 19
@Yalie:
Well this was roughly the same situation in May 2010 (check the numbers) and instead of being a ‘tipping point’ it continued to ratchet higher through 2011. I think the reality is that the resolution is not high enough to accurately call a ‘tipping point’ to the month based on the metrics tracked. As Twisted Sister says, the trends should be annualized before having any confidence that a ‘tipping point’ has passed.
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June 20th, 2012 at 12:31 pm 20
@Troll: Looks like interest rates dropped during the year. I guess that may have helped things along.
http://www.bankofcanada.ca/rates/interest-rates/canadian-interest-rates/
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June 20th, 2012 at 12:37 pm 21
@Yalie: your cracked crystal ball is broken in halved.
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June 20th, 2012 at 12:38 pm 22
I’m increasingly convinced that the deflating balloon analogy that is often mocked may be accurate.
While prices are not diving, the sales figures suggest the market is not healthy by any stretch. And if sales are dead during a period of historically low interest rates and a fairly stable economy, it’s hard to imagine would could cause them to pick up.
On the other hand, I have doubts that anything is going to happen that would suddenly compel a large section of owners to sell. Interest rates may creep up but they’re not going to skyrocket. Unlike the US pre-crash, I doubt there are hordes of NINJA-type owners in Vancouver.
So my guess is stagnation with fairly moderate drops that will eventually (and I stress eventually) culiminate in a 30% drop from peak. But this will take years and in the meantime no one is happy – sellers are not reaping the fortunes they thought they were sitting on and buyers are still either priced out or wary of buying a declining asset.
In short – it sucks out there.
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June 20th, 2012 at 12:40 pm 23
@Troll:
Also a 10-year high doesn’t mean that inventory is high enough in absolute terms to cause a crash.
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June 20th, 2012 at 1:06 pm 24
@mosesupposes:
It doesn’t matter if rates stay low. They’ve become irrelevant (unless they rise). This is because prices have moved up to maximize affordability at today’s rock bottom rates.
Even if rates stay here forever, prices can only hold if incomes move up (and thus improving affordability) – we know this won’t happen in today’s weak economy.
Because incomes won’t move up, we can be assured prices will come down, because even if rates stay low, the number of qualified borrowers will eventually run out, especially if lending is tightened.
Prices will not hold, and there will be no soft landing.
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June 20th, 2012 at 1:10 pm 25
@Troll:
Months of Inventory:
July was 2010′s peak MOI.
We have a chance of hitting 7 MOI by end of June
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June 20th, 2012 at 1:19 pm 26
@Anonymous:
True, using only a boom decade as reference (2008 exempt) may exaggerate any slowing. It’d be nice to see inventory and sales levels for the ’90s as comparison.
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June 20th, 2012 at 1:22 pm 27
@Absinthe: “was planning on shutting down my credit cards for good”
Probably best to keep one, if you plan on flying anywhere ever…
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June 20th, 2012 at 1:28 pm 28
@VMD: the inventory numbers for 2012 are well within normal for years other than 2010.
all the stats are within a normal range for other years. it may not be the case that it is the same year, but there is nothing unusual going on in this years market.
sorry, bears. no crash yet again!
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June 20th, 2012 at 1:42 pm 29
@Troll:
“Well this was roughly the same situation in May 2010 ”
Something (consumer debt in this case) being at an all-time high is not the same situation in one year as in another.
For example, Greek debt has always been at an all-time high.
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June 20th, 2012 at 1:45 pm 30
@mosesupposes:
“On the other hand, I have doubts that anything is going to happen that would suddenly compel a large section of owners to sell.”
Nothing happened that would have suddenly compelled a large section of owners to sell in the US, either.
Market prices are set by the people who ARE buying and selling, not the people who aren’t.
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June 20th, 2012 at 1:45 pm 31
@VMD:
“July was 2010′s peak MOI.
We have a chance of hitting 7 MOI by end of June”
I must be dreaming….
According to VHB June 19th, 2012 at 6:15 pm Says,
MONTHS OF INVENTORY
Inventory as of June 15, 2012 19275
Current MoI at this sales pace 8.01
In order for it to drop back to 6, we need 8 days with around 150+ sales…
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June 20th, 2012 at 1:52 pm 32
Here in HAMville aka Richmond, I am seeing a lot of “whack n’ smack” aka people have bought the land with old home. Owner or tenants are gone.
The new owners demolish the home, but leave the cement foundation.
Usually that was gone as well.
Translation…got caught buying HIGH… stuck….remove the liability of the building(aka squatters, arsons, metal thieves etc)..and pray for more HAM.
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June 20th, 2012 at 1:54 pm 33
@mosesupposes: So my guess is stagnation with fairly moderate drops that will eventually (and I stress eventually) culiminate in a 30% drop from peak. But this will take years and in the meantime no one is happy – sellers are not reaping the fortunes they thought they were sitting on and buyers are still either priced out or wary of buying a declining asset.
But that’s exactly how real estate markets work, they are not very liquid so they tend to move S.L.O.W.L.Y. over the course of years. Look at the states, falling since 2006. Anybody who is hoping to wake up to a sudden change is going to be disappointed.
And that is exactly why sites like this warn about real estate bubbles. They are a drain on the economy for years and years.
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June 20th, 2012 at 1:56 pm 34
@Al: For MoI you might get a number closer to 6.0 if you calculate it after the month-end expiries. But that is just a blip as many of those relist in the weeks that come.
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June 20th, 2012 at 1:59 pm 35
@patriotz:
Ok, Mr. Pedantic, geez. The point is that the metrics presented do not necessarily point to a ‘tipping point’. Saying that debt is higher this year than 2010 may show higher risk of a tipping point, but not the arrival of one. Get it?
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June 20th, 2012 at 2:02 pm 36
Maybe the unsustainable household debt will be the tipping point, but may not happen without any changes to the economic conditions, change in employment or some type of economic shock.
The US had the collapse of Lehman Brothers which collapsed the stock market or did the housing collapse occur first, I don’t remember.
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June 20th, 2012 at 2:07 pm 37
@patriotz:
Well, except for the fact that interest rates were rising and a whole schwack of subprimes were expiring around 2007-8 at higher rates forcing people to sell.
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June 20th, 2012 at 2:14 pm 38
@s:
Housing collapsed two years before lehman.
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June 20th, 2012 at 2:27 pm 39
@Anonymous:
And the stock market peaked a year earlier.
Financial crises are the result of falling asset prices, not their cause.
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June 20th, 2012 at 2:50 pm 40
Looks like it isn’t just the RE industry who wants stooges in our universities:
http://www.theglobeandmail.com/news/national/canadian-universities-colleges-confront-questions-about-chinese-ties/article4353705/
Don’t miss the comments.
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June 20th, 2012 at 3:28 pm 41
@Troll:
Exactly. Plus the high level of new inventory had to get cleared out in areas that it should never have been built in.
Neither of those two things are truly factors in this market. Despite the fact that we have cheap money in the form of low interest rates, it isn’t ‘easy money’. The banks are stringent in their lending standards and we never had the number of marginal lenders pushing money out the door. Our new inventory for the most part has been fairly tight.
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June 20th, 2012 at 3:32 pm 42
@s:
The problem with saying household debt is high is that we don’t have an understanding of where that debt has been placed. Anecdotally, much of it is invested in things like small businesses. Nowadays it’s easier to borrow money off your household line of credit than it is to go to the bank and get a commercial loan. The increase is real estate values has exacerbated this effect because it has given people an ability to borrow even more money.
It would be interesting to see a real breakdown of where that debt has gone. I haven’t seen any such study.
Until you know that, I think it’s hard to make a case that this is evidence of a bubble, rather than something else.
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June 20th, 2012 at 3:40 pm 43
@mosesupposes:
I agree with your prediction of a stagnant outcome, but not the magnitude. I can imagine about half your prediction over the next 5 years.
The other effect we are about to feel is another NDP government. History will repeat itself, similar to the 90s. Small businesses will get hammered with higher taxes. Households will see increased taxes and silly revenue schemes based on social experiments. The resource industry will take a downturn as the NDP slow down forestry, mining and oil projects.
Fewer people will come to BC. Fewer people will have jobs. Incomes will be stagnant. This general malaise will impact the real estate market. Construction will drop and prices will be flat, just like the 90s. Hopefully they get booted after one term and things will pick up again. Unlike the 1990s, the NDP will not have the luxury of a booming North American economy. Their lack of economic understanding will show itself far more quickly than the last time around. The public will quickly make that link.
Guys, is it really worth the pain to send a message to somebody who has already resigned?
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June 20th, 2012 at 3:45 pm 44
Hey guys I could use your help on something. I have about $4000 owed on a Fred card balance transfer. The promo rate of %2.99 expires end of September then goes to 19.9. Since I don’t own a house, my options are basically bank line of credit at 9.9 % or find another promo rate. Oh also I need to buy a new used car very soon say $2500. I have good credit but it seems like since I don’t have a huge mortgage my options are limited . I bet a lot of you guys are probably in a similar situation .
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June 20th, 2012 at 3:56 pm 45
@mosesupposes: “On the other hand, I have doubts that anything is going to happen that would suddenly compel a large section of owners to sell.”
We don’t need a large section of owners to suddenly sell. We just need less people to suddenly realize now may not be a good time to buy and delay buying. That is what happened in 2008. Listings went up because buyers decided not to buy not because sellers flooded the market. Once less people decide not to buy and prices start falling even more people decide to hold off buying. Then with falling prices lenders don’t want to lend. It is the bubble in reverse.
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June 20th, 2012 at 4:06 pm 46
Interesting tidbits on credit card debt.. look up mastrcard and Visa stock on the NYSE…. over the past few yrs it is up way way up! They are racking in the profits, they just better hope all the borrowers pay back, i know so many people who live off CC’s, just last night at Safeway dude in front of me had 2 cards declined before the 3rd went thru….boy was he red in the head!
Once the cards are maxed the spiral downwards will unfold!
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June 20th, 2012 at 4:15 pm 47
@midnite toker: I suspect you are a troll. If not, check out the SmartLine Platinum MasterCard from Capital One, it has a permanent rate of 5.99%. You are actually doing pretty good, debt wise, but keep it in check. If you had a HELOC, you’d probably be tempted to blow $30K on a new vehicle, and then you really would be in big debt.
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June 20th, 2012 at 4:18 pm 48
@Anonymous: LOL thanks, not sure why that was considered trolling. Theres a lot of people on here that seen knowledgeable about finance.
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June 20th, 2012 at 4:27 pm 49
@midnite toker:
Many bears here have a lot of cash and other assets because they haven’t been spending that money on mortgages, so they don’t need credit for day to day things or car purchases. They just pay cash. I think Anonymous thought you might have been a troll because you might have been trying to get bears to admit that they did not have cash reserves.
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June 20th, 2012 at 4:28 pm 50
Some sucker just paid 10M for a South Granville SFH. Only cow. Pay 10M for a 20k-ft 10k ft SFH?
The worse is the builder paid only 1M 12 years ago for the lot. He turned 1M into 10M in 10 years. Why should everyone work a normal job and not become a real estate speculator. The government encourages such behaviour.
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June 20th, 2012 at 5:17 pm 51
@I’m a bear but…:
“We don’t need a large section of owners to suddenly sell. We just need less people to suddenly realize now may not be a good time to buy and delay buying. That is what happened in 2008. ”
That’s not what happened. There was a worldwide credit crisis.
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June 20th, 2012 at 5:19 pm 52
@Anonymous:
>>That’s not what happened. There was a worldwide credit crisis.<<
That is what happened. You second sentence merely describes the motivation.
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June 20th, 2012 at 5:21 pm 53
@Dave:
“Construction will drop and prices will be flat, just like the 90s.”
That’s “flat” in Daveish, not English. In fact there was a bubble under Harcourt and a slow decline under Clark which took away about 1/2 of the increase.
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June 20th, 2012 at 5:24 pm 54
@N:
You are all getting it wrong. It was in 2006 that demand dropped off and RE prices started falling in the US.
As I’ve already said, the crisis of 2008 was the result of falling prices, not their cause.
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June 20th, 2012 at 5:25 pm 55
@Tacky Tocker: Visa and MasterCard have a nice little thing going. They make money on the transaction, but are not on the hook for defaults. Banks that issue the cards make money on the high interest rates, but are on the hook for defaults.
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June 20th, 2012 at 5:40 pm 56
@Dave: This may give you a bit better idea of where the money goes from HELOC’s
http://www.newswire.ca/en/story/877853/canadians-lack-knowledge-about-home-equity-lines-of-credit-but-only-one-in-ten-seek-expert-legal-advice-poll-reveals
Of those polled, 5% use it for business funding. Interestingly more than double (11%) use it for living expenses and for vacations respectively.
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June 20th, 2012 at 5:43 pm 57
@Not much of a name…:
So 25% of those with HELOCs have never used them!
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June 20th, 2012 at 5:45 pm 58
Turner is bound to be right one day—many economists agree on that. In fact, when you look beyond his bluster and often piquant language, Turner seems downright moderate. That’s because he recently entered a new phase in his evolving career, becoming a partner in Turner Tomenson and Associates Family Wealth Management. Now that he’s betting other people’s money on his views, accuracy is much more important, and controversy, long a boon for his career, has become a liability. Self-serving hyperbole and a huckster image could torpedo his newest venture.
Toronto’s housing forecast according to Garth Turner, the Dr. Doom of real estate
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June 20th, 2012 at 5:49 pm 59
What would happen if somebody took out a HELOC, used all of the available cash as RRSP contributions, then claimed bankruptcy after a year?
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June 20th, 2012 at 5:52 pm 60
@ReadyToPop:
Also, his advice seems to be geared towards those who have sufficient wealth to be able to live off the income earned by their investments rather than those who are looking for capital growth. See his attitude towards preferred shares, for example.
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June 20th, 2012 at 5:53 pm 61
New Listings 235
Price Changes 145
Sold Listings 106
TI:19320
http://www.laurenandpaul.ca
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June 20th, 2012 at 6:03 pm 62
@Anonymous:
“What would happen if somebody took out a HELOC, used all of the available cash as RRSP contributions, then claimed bankruptcy after a year?”
Unless there was a crash faster than almost anyone here expects, there would still be equity in the house. The lender has the right to call the HELOC as soon as the equity drops below 80% and force the sale of the property.
The home owner would come out further ahead by simply selling in the first place.
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June 20th, 2012 at 6:11 pm 63
Garth seems quite confident that Flaherty will kill 30-year mortgages in tomorrow’s announcement. Will he be right this time…?
“The man who turned a humming but affordable real estate market with 25-year mortgages into a bloated bubble with 40-year loans, is about to come full circle. His work is now done. The average family has been priced out of the average home. Horse. Barn. F. Go figure. The 30-year mortgage is finished. So is the bubble.”
http://www.greaterfool.ca/2012/06/20/the-little-f-bomb/
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June 20th, 2012 at 6:14 pm 64
Ah geez…
Same Leftie Retards
…..back to combing my flaxen hair.
PS whats yer sister doing tonite?
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June 20th, 2012 at 6:15 pm 65
The federal Finance Department is moving to further tighter mortgage rules to address concerns over high Canadian household debt.
The government announced Wednesday it will reduce the maximum amortization period for a government-insured mortgage, lowering it from 30 to 25 years, and also drop the upper limit that Canadians can borrow against their home equity from 85 per cent to 80 per cent.
http://vancouvercondo.info/2012/06/the-new-lending-guidelines.html#comments
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June 20th, 2012 at 6:17 pm 66
@VMD: “Will he be right this time…?”
No.
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June 20th, 2012 at 6:20 pm 67
http://www.canadianbusiness.com/article/88442–cibc-winding-up-firstline-mortgage-business-after-it-fails-to-find-buyer
“TORONTO – CIBC (TSX:CM) says it will wind up operations at its FirstLine Mortgage business after it failed to find an acceptable buyer.
The big Canadian bank said Wednesday it couldn’t find an acceptable deal after trying since March to shop around its FirstLine mortgage-broker unit.”
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June 20th, 2012 at 6:20 pm 68
@good-format: No way, F’s gonna do something dumb like indicate that rates are going to stay low FOREVER!!!
Seriously though, F’s under H’s thumb and needs to keep the biggest voting block happy. He already gave them the pass on delayed pension so can’t hold rates low forever as the boomers are going to demand performance for fixed income; heck they probably want a strong loonie too for all that travelling they say they will but never will do.
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June 20th, 2012 at 6:21 pm 69
@good-format
What happened to the OSFI proposal of 65% limit on HELOCs?
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June 20th, 2012 at 6:27 pm 70
@Anonymous:
Don’t you wish you’d refreshed before you clicked the “submit” button?
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June 20th, 2012 at 6:30 pm 71
@good-format: here is the CBC link to this announcement:
http://www.cbc.ca/m/touch/business/story/2012/06/20/mortgage-rules-tightened.html
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June 20th, 2012 at 6:30 pm 72
Y know…
Here I was going to give you Canadian MORONS some good investment tips.
but y’know what……Yer all a bunch of HOSER LOSERS….
Shitty Hockey team (but mind you good football team)….and the weather SUCCKKSSS!
Foreclosure? on (4) votes by inbred basement suite tribe watching “Deliverance” for the 100 th time?…this week?
…..yeah same to you
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June 20th, 2012 at 6:33 pm 73
Mortgage rules to be tightened further by Ottawa
I think good-format meant to post this link? Hot off the press, over at the CBC
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June 20th, 2012 at 6:50 pm 74
@Donald Trump: Is that the breaking news that’s getting you angry like that?
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June 20th, 2012 at 6:55 pm 75
@ Makaya
It’ll be fun listening to all the damage control over the next few days in the media by all of the usual talking-heads.
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June 20th, 2012 at 7:00 pm 76
“Of those polled, 5% use it for business funding.”
Only a small part of the population is truly self-employed in a real enterprise that might require any kind of “funding”. IMHO, economists should soil their pants over such an ominous figure. How many businesses are going under as HELOCs get reined in?
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June 20th, 2012 at 7:03 pm 77
@patriotz:
“Don’t you wish you’d refreshed before you clicked the “submit” button?”
No. 30 year mortgages will still be available, just as 35 year mortgages are today. You just won’t be able to get one with CMHC insurance.
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June 20th, 2012 at 7:11 pm 78
Re: Flaherty tightening insured mortgages
Anyone think we might see record listings this Fall?
http://www.theglobeandmail.com/news/national/ottawa-tightening-mortgage-rules-no-more-30-year-amortizations/article4358876/
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June 20th, 2012 at 7:14 pm 79
Booyah… get your 30 year CHMC insured mortgage while you can or be priced out forever!!!!
Garth is right!
My feeling is BC is ignored by Ottawa, but when real estate starts going crazy in Toronto, they take notice. I can’t wait to see real-estate agent spin on this one. This is going to hurt.
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June 20th, 2012 at 7:17 pm 80
25 year mortgage rules will turn 100K worth of mortgage from $449 per month to $500 per month at 3.5% interest. That is a fair difference. That cuts 10% off the amount someone can borrow with CMHC insurance. That will have an impact.
Anyone know when this takes effect? Is there a delay that might create a short term rush to buy?
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June 20th, 2012 at 7:19 pm 81
@I’m a bear but…: If there is a deadline that is not immediate, it might also create a rush to list.
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June 20th, 2012 at 7:23 pm 82
@I’m a bear but…:
The delay last time was about 2 months. I imagine you’d need to close any deal before the change takes effect (I.e a preapproval wouldn’t be sufficient)
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June 20th, 2012 at 7:25 pm 83
@Anonymous: “No. 30 year mortgages will still be available, just as 35 year mortgages are today. You just won’t be able to get one with CMHC insurance.”
True but is the first time buyer who needs the CMHC insurance that drives the market. It also sets the standard mortgage at 25 years. Now if you need a 30 year mortgage to afford the payment it means you can’t afford it.
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June 20th, 2012 at 7:26 pm 84
30 years to 25. Excellent news. Little by little, the screws are being turned.
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June 20th, 2012 at 7:28 pm 85
Ok Bears… Time for the 25 Year Festivities…..
,—-,.
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/ ; / `—-’.'\ ;
; / /-, __ \ . |
/ / /.`| / /\/ / :
./__; : / ,,/ ‘,- .
| : .’ \ ”\ ;
; | .’ \ \ .’
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/ \ / |/ | / \ / \ / \
$$ \ /$$/ $$$$$$$$/ /$$$$$$ |$$$$$$$ |/$$$$$$ |
$$ \/$$/ $$ |__ $$ |__$$ |$$ |__$$ |$$ \__$$/
$$ $$/ $$ | $$ $$ |$$ $$< $$ \
$$$$/ $$$$$/ $$$$$$$$ |$$$$$$$ | $$$$$$ |
$$ | $$ |_____ $$ | $$ |$$ | $$ |/ \__$$ |
$$ | $$ |$$ | $$ |$$ | $$ |$$ $$/
$$/ $$$$$$$$/ $$/ $$/ $$/ $$/ $$$$$$/
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June 20th, 2012 at 7:28 pm 86
@900kCrackHouse:
Yes I wonder if late June was selected as the date to do the change to try to avoid the rush to buy we went through in the Spring of 2011 when sales spiked after announcing the 30 max mortgage. With the summer being slow for sales this may have been the reason they didn’t do it in the Spring.
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June 20th, 2012 at 8:08 pm 87
It didn’t take long for the industry to react…
Here is a comment from “TheMtgWhisperer” (mortgage whisperer, really?) on the CBC article:
Cry me a river…
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June 20th, 2012 at 8:18 pm 88
Another one from the comment section…
Oh gosh… Since when “buying = building some kind of future”? Swiss people would laugh very loud at that!
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June 20th, 2012 at 8:18 pm 89
@ Maverick
Forget record listings this fall…try the summer! 20,000 inventory by Canada Day…30,000 by year-end!
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June 20th, 2012 at 8:20 pm 90
Yeah …well… I own HAARP… ya loser Luongo fans
Not my F$$$king fault ya paid $250 for a Canucks Jersey ” Made in Bangladesh” for 50 cents.
Tidal waves in West Van……Hurricanes in Surrey..bwahahahaha you won’t be able to tel them apart when the feel my wrath
PS is there any difference before I push the red button ?
Thx…and yeah F$$k U -2
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June 20th, 2012 at 8:22 pm 91
Fuck yeah, 25 year party!!!
This reduction in amortization has a larger effect because dropping from 35 to 30 resulted in a 14% decrease in amort time, but dropping from 30 to 25 results in a 17% decrease in amort time which raises monthly payments by a larger factor than the previous tightening.
By my calculations, a 5 year term at 3.19% will now require a near 12% price drop to result in the same monthly payment.
That means mortgages are going to be even harder to get, and that means less sales and higher inventory until prices fall significantly.
There will be much fretting, hand-wringing and pant shitting around Vancouver among the morons who bought at the top.
I can already hear the wailing and it sounds beautiful.
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June 20th, 2012 at 8:26 pm 92
@Makaya:
And of course the irony is that these rules are actually going to lower the high prices this couple is complaining about. But of course they won’t see it that way, and instead will rush out and buy within the next few weeks believing that they’re buying “before it gets more expensive”.
I would like to say that dimwits like this deserve exactly what they’re about to get, except that I’ve known far too many otherwise brilliant people who literally lose their minds when it comes to housing. Psychology is a funny thing.
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June 20th, 2012 at 8:48 pm 93
@Makaya:
Re: building a future in Vancouver, I’ve just spent a couple nights filling out applications to live in co-ops in the COV. For me, and my $100k in savings, and my two kids, I think that this is a better way of “building a future in Vancouver” than entering into massive debt.
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June 20th, 2012 at 8:51 pm 94
@900kCrackHouse:
My wife and I were laughing about the same thing.
Vancouver prices go “plaid” and nobody cares at all.
But now that Toronto is overheating – stop the presses.
Doesn’t matter at all that the Van RE market has been crap all year.
BTW, if you don’t know what “plaid” means (and shame on you if you don’t), click below:
http://www.youtube.com/watch?v=mk7VWcuVOf0
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June 20th, 2012 at 8:53 pm 95
OK:
you people in US North/51st state were warned…
Me and the NYC boys at Goldman Scrotums and JP Morgue’n are calling in the loans…
Yer 18 year old landlords will have to evict you from your basement suites…and/or yer first born.
(BTW: West End exempt..we “understand”)
Go KINGS Go !!!
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June 20th, 2012 at 8:55 pm 96
Eh, I can’t really get that excited about the 30/25 year amort change. Too little, too late. Feherty is making all these micro changes and none of them have been working, prices have only gone up since he started tightening the rules. Besides, I suspect that there are not as many 30 year mortgages as we like to think. Anyone have the stats?
Wake me when they raise the DP to 20%.
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June 20th, 2012 at 9:09 pm 97
@Moe Szyslak: “Too little, too late.”
Yes too late for those who bought and too late to stop the damage to the economy but not too late for most around here.
“I suspect that there are not as many 30 year mortgages as we like to think”
Almost all of them are 30 year amorts. With prepayment being allowed on most mortgages 30 year is the norm even if you do want to pay it faster. What this impacts most is first time buyers. Almost all of them are maxing out and now they can afford 10% less than they could before.
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June 20th, 2012 at 9:15 pm 98
@Makaya: “Here is a comment from “TheMtgWhisperer”…”
Lets buy the fact the Mortgage broker is actually concerned about his client paying too much interest on credit card debt. Once his client gets the credit cards paid off from his HELOC all he will do is rack up the credit cards again. He wont save any interest. He has proven by racking them in the first place he can’t manage a credit card. Offering someone more credit who already has too much debt is never going to help. Do these morons really not get it?
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June 20th, 2012 at 9:20 pm 99
@Moe Szyslak: “Feherty is making all these micro changes and none of them have been working, prices have only gone up since he started tightening the rules.”
What this proves is the Harper government wants people to take on less housing debt. If it doesn’t work then there will be more changes in the future until debt starts to contract. Once it contracts housing prices will follow. The Conservatives have a majority and many years left. It is clear by this and other policy changes what they intend to do.
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June 20th, 2012 at 9:24 pm 100
Yeah..I get it..
That damn Luongo is like fur ball caught between (2) body orifices!!!!
No wonder ya can’t think straight !
No problemo…me and my connections will have him working at Spaghetti Factory as penance !
PS Sign Schneider ASAP…
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June 20th, 2012 at 9:26 pm 101
@Best place on meth: “That means mortgages are going to be even harder to get, and that means less sales and higher inventory until prices fall significantly.”
Actually once prices fall significantly sales will still be slow and inventory will still be high. Look at the US as an example of what it looks like after prices have already fallen significantly. Real estate is done for a very long time.
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June 20th, 2012 at 9:33 pm 102
Haha, you people dont get it. The only people who will be able to buy now are new immigrants. You think that kid working at Costco will ever be able to buy?? Any high school parking lot within an hour drive of downtown will be 100% Mercedes instead of 90%. Have fun raising your kids in Langley, well those of you who dont want to live in a fricking CO-OP!
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June 20th, 2012 at 9:34 pm 103
@Anonymous:
“Almost all of them are 30 year amorts. With prepayment being allowed on most mortgages 30 year is the norm”
I’m not disputing what you say but can you point me to a source? Just wasted an eternity on the CMHC site and couldn’t find anything. I thought I read somewhere that most CMHC mortgages were 25 years but that is just a foggy recollection.
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June 20th, 2012 at 9:58 pm 104
@Not much of a name…: Interesting. Kind of kills Dave’s little canard regarding people borrowing against their home equity to start businesses. No real wealth generation to see here. Move along.
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June 20th, 2012 at 10:09 pm 105
@Anonymous: “Almost all of them are 30 year amorts”
There’s no advantage whatsoever in taking a shorter amortization. You’re better off with the longer amortization whilst making payments as if you were on the shorter schedule to take advantage of the payment flexibility it gives, providing your over-payment T&Cs allow.
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June 20th, 2012 at 10:31 pm 106
@Urbain:
I am surprised by those numbers. I would have guessed the percentage was much higher. The survey was reasonably sized as well.
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June 20th, 2012 at 10:34 pm 107
@patriotz:
Actually, it looks like you have got it wrong. My comment was in response to a comment, which was in response t, the following comment, which was clearly about Vancouver, not the US.
I can understand you getting confused about what was being discussed. There are a lot of threads on this board. But it’s amazing that 20 people voted up your comment. Come on guys, start reading.
“We don’t need a large section of owners to suddenly sell. We just need less people to suddenly realize now may not be a good time to buy and delay buying. That is what happened in 2008. Listings went up because buyers decided not to buy not because sellers flooded the market. Once less people decide not to buy and prices start falling even more people decide to hold off buying. Then with falling prices lenders don’t want to lend. It is the bubble in reverse.”
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June 20th, 2012 at 10:38 pm 108
@Dave: Well, you did guess that a few times. Unfortunately, many of our fellow countrymen are playing home equity roulette rather than starting businesses and engaging in economy building. I guess they all thought someone else would do it.
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June 20th, 2012 at 10:41 pm 109
@Urbain:
On second thought, the survey doesn’t account for actual dollar percentages which is what we actually want to know. Obviously a HELOC used for a small business is going to be larger in dollars than say for a vacation.
Sure few people start small businesses, but when they do, it’s usually a significant amount.
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June 20th, 2012 at 10:59 pm 110
@Dave:
HELOCs: basic living expenses (11 per cent), a vacation (11 per cent)
It looks like those HELOCs are being put to good use. Imagine 22% of HELOCs are for living expenses and vacations. How many HELOCs are out there? Those mortgages can’t be too far from foreclose.
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June 20th, 2012 at 11:06 pm 111
@midnite toker:
oh thats easy, just get few thousands out of the stash you keep to purchase a house when the prices fall.
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June 20th, 2012 at 11:07 pm 112
@Anonymous:
I doubt 100% of any given HELOC is used for a single purpose. I know you’d all like to imagine people taking out 85% of their equity and blowing it on a dozen lavish vacations, but it’s unlikely to be the case.
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June 20th, 2012 at 11:18 pm 113
Now I regret being so argumentative about what happened in 2008. Who cares what happened then. It’s 2012 and amortizations are going to 25 years. Life is good (or will be soon).
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June 20th, 2012 at 11:39 pm 114
Instead of changing the max amort period, I don’t know why they don’t simply reduce the % of income allowed to be put towards the monthly mortgage payment. This could have the same effect of reducing affordability and therefore prices, but would also ensure there is more household income left over each month to stimulate the rest of the economy.
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June 20th, 2012 at 11:58 pm 115
@Moe Szyslak: “I thought I read somewhere that most CMHC mortgages were 25 years but that is just a foggy recollection”
A large part of CMHC’s portfolio is of older vintage before amorts were raised, so that’s not much of a surprise.
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June 21st, 2012 at 12:26 am 116
@Phil: Yes Phil, I don’t get it explain for me.
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