Remember when we saw all the fun the US was having with crazy long amortization terms and teaser cash-back zero down mortgages?
Oh yeah, we couldn’t be left out of that action!
That’s why in 2006 we cranked CMHC max amortization terms from 25 to 35 to 40 years. We got rid of any upper limit to insured mortgages and allowed zero down deals with interest only payments for the first 10 years.
It was the only way to compete with the Americans!
And now we hear that we’re supposed to be ‘responsible’ with our debts and ready for interest rate increases.
The government has been ramping back the gravy train over the last couple of years though, trying to engineer a ‘soft landing’ for the housing market.
And they’re succeeding, it keeps getting softer and softer.
So now we’re back to the 25 year cap. Everything old is new again.
And apparently reducing amortizations is starting to have an effect on first time buyers causing some to wait:
First-time homebuyers were expected to be the most affected by the new rules, which included reducing the maximum amortization period for a government-insured mortgage from 30 to 25 years, and also dropping the upper limit that Canadians could borrow against their home equity from 85 per cent to 80 per cent.
A year later, about 66 per cent of buyers said the changes had not affected their timeline on buying a first home, according to a survey by BMO Bank of Montreal.
But first-time buyers in B.C., where Vancouver prices were considered particularly overheated, were most likely (33 per cent) to say they would wait longer to buy their first home. That compares to 11 per cent of Ontario buyers, 25 per cent in the Prairies and 28 per cent in Atlantic Canada.
read the full article over at the CBC.