Tag Archives: caamp

How much mortgage is too much?

You’ve probably heard over and over again that household debt in Canada is climbing to record levels.

And it’s probably not a surprise to you that mortgages due to the high cost of housing holds some blame there.

But did you know that the total amount of mortgage debt in Canada has nearly doubled in the last four years?

According to CAAMP the total national mortgage debt in 2008 was $664 billion. It now stands at a total of $1.2 trillion.

Over in the Vancouver Sun Barbara Yaffe sees this stat and seems to blame the little transaction fees for the high cost of housing.

But there’s a little four letter acronym conspicuously missing from her article: CMHC.

That would be the Canadian Mortgage and Housing Corporation, which has been flooding the market with insured mortgage money at a time of low interest rates.

So here’s the real question: Is Canadian mortgage debt so high because of our house prices, or are our house prices so high because of that mortgage debt?

Mortgage brokers warn about new rules

Canadian mortgage brokers are freaking out about new refinancing rules proposed by the OSFI which has taken over responsibility for the CMHC. Reasonably enough, they’re asking for clarification about proposals to require banks to check income and current house value before refinancing.

Currently, when mortgages come up for renewal, banks tend to focus on the borrower’s payment history. They rarely appraise the property again and not all banks will check the borrower’s updated income level, Mr. Murphy said.

“CAAMP strongly recommends that this concept be clarified so that mortgages continue to be renewed at maturity without requalification,” the industry association said in a submission to the Office of the Superintendent of Financial Institutions (OSFI).

“If not, homeowners who have been in compliance may no longer qualify. This would result in a number of properties hitting the market at the same time and thereby driving down prices.”

Such a phenomenon could add further fuel to a real estate downturn if lower house prices and higher unemployment caused more people to lose their homes upon renewal, Mr. Murphy suggested.

Read the full article in the Globe and Mail.