What if mortgages were harder to get?

Right now mortgages are easy to get and interest rates are dirt cheap.

But the one thing you can rely on in economic cycles is change.

What will it look like if interest rates start to rise or mortgages get a little more difficult to obtain?

Or worse, what if the CMHC wasn’t there to insure low equity mortgages and everyone required a 20% down payment?

The Globe and Mail has an article outlining some of the repercussions: lower prices, economic fall out, etc and comes to this conclusion:

For the time being, mandatory 20-per-cent down payments are merely an academic discussion. Our government wouldn’t risk such a bold change. That said, the trend of transferring more housing risk to the private sector may continue.

Other countries deem us lucky to have a proven and reliable housing finance system. Rather than dismantle it, it’s likely safer to spot the risk areas and carve out those malignancies with a scalpel. That would minimize collateral economic damage, incentivize proper risk taking, and further reduce the odds of government-funded mortgage rescues.

It would also preserve housing options for qualified Canadians who have lesser payments but can afford to own.

Read the full article here.

 

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s
Guest
s

@crashcow,

That’s just too funny! If it rains they blame it on the rain, if it’s sunny they blame it on the sun.

I wonder what’s the perfect condition for people to buy homes.

mac
Member
mac

Happy Crashgiving, bears!

Deng Buhao
Guest
Deng Buhao

@crashcow:

What? All i have to do is sign on the dotted line? Hey look, that dog has a puffy tail … Here puff puff, here boy.

Anonymous
Guest
Anonymous
RBC Lending Policy Update (from someone working for the bank?): “As the government policy tightening for equity deals, it is getting challenging to obtain an approval for equity take-out requests today. However, RBC remains very competitive in terms of providing financing to those who have high net worth properties or having over 35% downpayment to purchase their new properties. If clients are either new immigrants or non-residents, RBC also has excellent equity programs to serve those clients in need. For refinancing up to 65% of the property value, clients may need to provide either employment income or liquid investments, either in Canada or overseas, to illustrate the repayment ability. For those who report employment income earned in Canada in particular, we may be able to provide financing up to 80% of the property value. For new immigrants, we can lend… Read more »
patriotz
Member

@Anonymous:
“You sound like Bob Rennie. He too believes if you can afford a shoe box then housing is affordable and there is no bubble. ”

Oh come on off it. What I have always said is what matters is price versus earnings, i.e. rents. If earnings cannot cover price you have a bubble in RE or anything else. Rennie himself has admitted that this is true in Vancouver, but he has his own pet definition of “bubble”.

The Economist says that RE prices in Switzerland are undervalued -7% versus incomes and -2% versus rents (In Canada they are +76% and +32% respectively). It may well be that SFH could be overvalued as they are a small % of dwellings.

http://www.economist.com/node/21551486

But if you want to challenge the Economist, let’s see some price versus rent comparisons.

Anonymous
Guest
Anonymous

@swissmacchiato: “With company pension contributions, I earn more than 30% more than what I could make in Canada.”

You make 30% more with pension contributions in Switzerland. And housing costs look to be more than double that of Vancouver which is in a bubble and requires 80% of the average income to buy a home. Maybe I am not good at math but it sounds like Switzerland is in worse shape than Vancouver and in far worse shape than the rest of Canada.

patriotz
Member

@Anonymous:
Your numbers are invalid for anyone who started working before 2003 because the CPP contribution rate has increased greatly over the last 3 decades. In 1985 it was 1.8% (each for employee & employer), now it is 4.95% each.

http://www.servicecanada.gc.ca/eng/isp/cpp/contribrates.shtml

On the other hand there’s a case to be made that new entrants to the labour force will be getting a bad deal – those rate increases were made to ensure that the boomers will get their CPP.

But if a new tier of CPP were created now it would not be subject to these demographic issues.

Anonymous
Guest
Anonymous
@patriotz: Your numbers are invalid for anyone who started working before 2003 because the CPP contribution rate has increased greatly over the last 3 decades. In 1985 it was 1.8% (each for employee & employer), now it is 4.95% each. You can plug in what ever CPP rate you want starting from what ever point you want and it will never match what you could get on your own. It works great for someone who only started working 20 years ago and is retiring today but not great for someone who works for 40 to 45 years. One group is subsidizing the other which IMO is not a fair pension system and why it should not be expanded and if anything disbanded completely. People really need to do the math and they will figure out how ripped off they are… Read more »
Anonymous
Guest
Anonymous
Here is how CPP works: Person A gets average job paying 50K per year in the private sector at 20 years old and retires at 65. He pays into CPP the max for 45 years. At age 65 he gets the max CPP with no other pension and lives very modestly. Person B becomes a cop at age 20 and works for 25 years paying into CPP for 25 years before taking the Cop pension and retiring at age 45. He will get the same CPP as person A above at age 65 even though he didn’t work for the last 20 years but collected a pension. His Cop pension continues after age 65 along with the CPP. Person A paid the CPP for an additional 20 years while this guy was retired but they still get the same CPP… Read more »
Not much of a name...
Member
Not much of a name...

@Anonymous:

The part most people miss is the employer is matching what the worker pays.

Which is even worse if you are self employed since you pay both parts yourself.

logic
Guest
logic

“a big fat university pension”

No such thing in BC – I can tell you that for a fact.

we'll see
Guest
we'll see

We’ll see what happens. Boomers run this country. A huge chunk is about to be taken out of their nest egg. We’ll see how willing they are bail out a bunch of young and full of cum brats who bought more condo than they could afford so that they’d have better access to casual sex.

After seeing their net value crash I don’t think boomers will be in the mood to take money from their precious medicare for those brats.

Romeo Jordan
Guest
Romeo Jordan

I’m hearing from HOMEOWNERS now that many are predicting price drops of 40% or so over the next couple of years. These are folks that own their homes and have no axe to grind.

Interesting how the sentiment is turning. I’m nearing NO bullish commentary.

Time + slow market = falling prices

Rinse and repeat.

Muppets, your fucked.

McLovin
Guest
McLovin
Question for the group: This is a 1/4 share in Whistler. I have heard they are well built and well maintained. What you get is 1 week per month plus the 2 weeks combined at X-mas and New Year’s every fourth year. Seller has dropped his price to $159K (Assessment is $233K) http://www.realtylink.org/prop_search/Detail.cfm?MLS=V861502 For this you pay $650 per month which covers the strata, taxes, upkeep and updating of the unit when required. You aren’t able to store anything here so it is basically a weekly rental. This development has at least 12 for sale and they are all the same basically so like a condo it is a race to the bottom when someone cuts their price. 18 months ago these were changing hands for $240K I noticed on Vancouver price drop that someone has cut his price to… Read more »
Anonymous
Guest
Anonymous

Switzerland is still doing well because still have the banking secret a.k.a the anonymous number account in place. Take that out of the equation and the picture would be a lot bleaker. For some reason they are incredible protective about the secret account and despite pressure from various other countries do not want to give it up. In fact they are fighting the German government over the Germans buying CD Roms containing leaked information on bank accounts German citizens hold in Switzerland to evade taxes.

Romeo Jordan
Guest
Romeo Jordan

McLovin,

Unless your retired and can use the full week (every fourth), it’s expensive as you pay a cleaning fee each time. From the price point, I think your talking Creekside, which is a bit on the quiet side, you can’t exactly stroll to Whistler. So in my analysis, it was not worth it.

I spend a ton of time up at Whistler, you can get some great rental deals.

I’ll buy once prices fall another 30%.

Romeo Jordan
Guest
Romeo Jordan

also hard to rent out, my intel tells me that most buyers have been very disappointed.

jay
Guest

Garth Turner:

The next hundred days could be the most pivotal in years for real estate.They’ll show one of two things. That the sales collapse now taking place in most of the country was just a silly overreaction to F’s big mortgage changes and new banking regs. Or, that housing is screwed.

Realtors (naturally) by and large fall into the first camp. Like the boss of the Vancouver cartel below), they maintain there’s a ‘standoff’ taking place between buyers and sellers. Vendors are wisely resisting dropping prices, they say, while opportunistic lurkers smell blood in the water and wait for values to fall along with sales. … …

http://www.greaterfool.ca/

RentersRant
Guest
RentersRant

@Mc Lovin

I’ve been watching those drop too. Similar situation at Legends at Creekside. All I can figure out is perhaps the $650 maintenance is for the full share and you only have to pay 1/4 of it? Otherwise $2600 per month maintenance is insane and the math, as you have pointed out doesn’t work out at all. At least at legends you get a very nice pool facility etc. Casabella is newer but doesn’t even provide that so what is the $650 for?

Anyone in an arrangement like this and can comment?

WOWSERS
Guest
WOWSERS

Re
1/4 share Whistler, I own one and yes can confirm the maintenance fees are per 1/4 yes they are high at approx 100$ night for a 2 bed and 50$ for a 1 bed, if your not using it at least 75% of the time it’s mot really worth it, but guys like me who go up every month it’s worth having, just try renting direct from Lodging Ovations during say Xmas or prime time in February or March and you’ll be paying 4-7 hundred a night for a 2 bedroom. Those hefty fees cover everything incl future capital replacement costs, they are very well managed and 100% stress free. These condos are best for users and not for income generation.

Anonymous
Guest
Anonymous

@McLovin:

You have to make full use of the place to even consider it. You will never rent it mid week so for 5 days it will sit empty. And WTF is with $650 maintenance? Considering you have to pay $700 per month mortgage on the place that works out to an equivalent monthly rate of $5400.

Personally I prefer a little variety in my vacations and with this place you lose the luxury of being able to leave your stuff there, the fridge stocked etc so it is not much different from a hotel. You can get nice rooms for $200 per night in Whistler anytime but Xmas and be closer to the lifts.

WOWSERS
Guest
WOWSERS

Nice rooms in whistler for 200$ night ? Maybe in June-November, and Fyi Legends is as close to the lift as they come. I just checked for example a 2 bedroom at Legends Dec 21-Jan-1 is 672.00 per night and that’s with a 30% discount 2 weeks would total 8450$

Anonymous
Guest
Anonymous

@WOWSERS:

Funny I said $200 per night anytime but Xmas and you use Xmas as an example.

Anyway you get Xmas once every 4 years. Over 4 years you pay $64,800 with mortgage and maintenance. The $8450 sounds like a deal to me compared to $64,800. Personally I would take the $8400 and fly to Hawaii and go to Whistler when it is $200 per night the other 50 weeks of the year.

patriotz
Member

@Anonymous:
“Person B becomes a cop at age 20 and works for 25 years paying into CPP for 25 years before taking the Cop pension and retiring at age 45. He will get the same CPP as person A above at age 65 even though he didn’t work for the last 20 years but collected a pension.”

That is simply not true. Full CPP payout is based on 40 years of contributions with the lowest 7 years excluded in calculating the payout. Someone working for only 25 years will get well under the full payout.

rp1
Guest
rp1

#7 @N: “I wonder if it would be possible, or desirable, to link CHMC insurance to a rent multiplier. For example, just as insurance is now only available for homes under one million dollars, you could say that insurance would only be available for homes selling at x times average square foot rents in the city. That might put an effective cap on prices for FTBs.”

Capping CMHC insurance to a multiple of local rents is an ideal solution.