Thoughts on new mortgage rules that were announced?

[REInvestors888]

The house has a 330K mortgage with a value of 600K and they won't do a thing.

Wow! If this refi or Heloc with huge equity is being denied, how about the 3-job millenials trying to save for down payment money to afford a roof over their heads? They will forever be basement dwellers at parents house or long term tenants! Poor guys.

This new rule really favors only the rich people never mind the low level sector. As the saying goes: Rich are getting richer while poor are getting poorer.

What a life!

 

[angelapeng]

I just did a refinance mortgage with CIBC. Started 2 months ago, because the old mortgage expired on Nov. 2rd, however, the bank could not close the deal until Nov. 22rd funding date, and at the meantime, I had to pay for $20 per day for 21 days due to the open rate mortgage for 21 days. CIBC said that they have a new CEO who was originally coming from Goldman Sachs focuses more on selling investment products to the rich clients instead of entertaining renewing the mortgage. Plus, it has moved their processing centre to India, hence delay for the closing.

TD called to ask whether to convert to fixed rate mortgage since their prime rate rises up, no equity take out at refinance for those who are on the equity programs and have to qualify for posted mortgage rate.

Feels like the Canadian banking industry are undergoing a few not only policy changes, but structural changes as well. It will be tight for a few years before it gets loose again.

What are your thoughts?

 

[REInvestors888]

With due respect to government officials involved in this new rule, I think they have lost touch in what is real and a dream. Thus, hitting the wrong button to solve the wrong problem.

IMHO: Price is always influenced by the law of supply and demand. Having said this, the problem in housing is not 'Demand', it's the 'Supply' side of the equation. If only the government will strive to deregulate building affordable housing to low/middle income population and strike a balance between 'Supply' and 'Demand', then, I believe there is no housing price/affordability problem.

Just my 50cents on this new rule........

 

[Rickson9]

the problem in housing is not 'Demand', it's the 'Supply' side of the equation.

Can anyone present data to support this?

 

[REInvestors888]

Can anyone present data to support this?

ECO 101 taught us (no offense intended) the above law and to support it, check out the links below:
http://business.financialpost.com/p...y-market-says-former-boc-governor-david-dodge

http://business.financialpost.com/p...s-for-sale-in-toronto-has-never-been-this-low

http://business.financialpost.com/p...mes-for-you-at-least-in-toronto-and-vancouver

Enjoy reading!

 

[Matt Crowley]

the problem in housing is not 'Demand', it's the 'Supply' side of the equation.

@REInvestors888 I agree with this part of your comment. It is something we are working on right now with Alberta UDI Affordable Housing Committee. The market is there to accept housing as a commodity, in the sense that everyone needs housing. From what I have seen, the biggest gains can be made to provide more supply line flexibility and less variable and unpredictable rules. We need to make a decision to grow up as a city in Edmonton and implement standards not more political interpretations on sun access, noise, height, amenity space, parking.

There will always be a need for social housing and we need to appreciate it as a wide social issue and should not be solely levied on new home owners which typically drive 75%+ of community growth. The important part of this is that affordability of housing affects every Canadian.

 

[Thomas Beyer]

In a nutshell: money will be somewhat tougher to get and will be somewhat more expensive. Stay short, say variable or 2-3 years fixed to minimize interest rates. Going long will be more expensive. Nothing dramatic will change. Don't overlever and have some cash ready for opportunistic buys, especially AB as it is bottoming out.

Rental property owners especially will receive more scrutiny. Assure that you can refi, and as such it may make sense to bite the bullet and go long, say 5 years, at a higher interest rate, to avoid being rejected in 2-3 years ! Ensure you ladder your mortgages such that not all come due at the same time if you own several. If you own 5, for example, ensure that one comes due every year, roughly.

Far more worrisome are higher and higher taxes and higher and higher deficits on federal & provincial levels amid muted oil prices due to overproduction.

Canada still a beacon of desirability among other nations in far worse shape.

 

[REInvestors888]

affordability of housing affects every Canadian

Very true!

IMHO: I believe housing affordability and more restrictive rules may cause major civil unrest down the road especially among young Canadians if the government will not act fast.

All I can say is that the Liberals are walking a very fine line here if they mess too much with people's biggest asset's values.

IMHO: Implementing more restrictive rules across the board in already tight market may cause the bubble to burst.

 

[Thomas Beyer]

IMHO: I believe housing affordability and more restrictive rules may cause major civil unrest down the road especially among young Canadians if the government will not act fast.

Seriously ? This is not the gun touting US. I think we will see a slightly lower home ownership rate, not 70% but perhaps lower to mid 60% range and as such, MORE RENTALS by both young folks and even older retired fols.

IMHO: Implementing more restrictive rules across the board in already tight market may cause the bubble to burst.

I think we will see a reduction is prices to some degree (see Vancouver) and/or slower increases. Other markets still rising, say Victoria, Sunshine Coast, Whistler, Squamish, Abbotsford or Okanagan in BC.

Keep in mind that Canada is an immigration country and with 300,000 to soon 400,000 people coming here every year the demand will continue in almost any urban area. Most cities are running out of room for new sub-divisions in cities and as such, LAND with a hosue on it will always be in demand in nice neighborhoods, and will likely continue to INCREASE in price even as "the average" drops.

Beware of averages as new smaller houses in the remote burbs will pull down "the average" while the house in teh city you boght will continue to go up !

People have drowned in rivers one foot deep on average. (TM)

Canada will remain the cream of the crap in industrialized nations !

 

[REInvestors888]

Keep in mind that Canada is an immigration country and with 300,000 to soon 400,000 people coming here every year the demand will continue in almost any urban area. Most cities are running out of room for new sub-divisions in cities and as such, LAND with a hosue on it will always be in demand in nice neighborhoods, and will likely continue to INCREASE in price even as "the average" drops.

You are 100% right. It is a function of the Law of 'Supply' and 'Demand'. As such, it is just logical for the government to act and open up more 'Supply' in nearby urban areas.

MORE RENTALS by both young folks and even older retired fols

Totally agree. Good for landlords but not for renters forever........

Just my 50cents........

 

[Willyboy]

I have a mathematical question. You guys say the higher the demand the higher the price but what I can't understand is the following. Let's say a house is listed for 500 k and there is one buyer that can afford only 450 k which means the buyer won't be able to buy the house. Now if we bring in another ten buyers that will increase demand but those additional buyers also can afford a maximum of 450 k. So now instead of only one buyer we have eleven buyers but still unable to buy at 500 k so my question is how the increasing demand here will increase the price?

 

[REInvestors888]

how the increasing demand here will increase the price?

In reality, if this 11 buyers are serious (not curious) and will make formal Offer stating the 'Price' that they are willing to pay (not afford) for their 'Demand', I think a bidding war will occur that will push 'Price' higher. Otherwise, see Thomas posts below as 'Demand' will eventually diminish.

I think we will see a reduction is prices to some degree (see Vancouver) and/or slower increases.

I think we will see a slightly lower home ownership rate, not 70% but perhaps lower to mid 60% range and as such, MORE RENTALS by both young folks and even older retired fols.

 

[REInvestors888]

Canada still a beacon of desirability among other nations in far worse shape.

Hoooray! Check this out, too!
http://www.bnn.ca/richard-branson-p...1&spJobID=864634139&spReportId=ODY0NjM0MTM5S0

 

[borisdavenport]

We were just denied a refi or HELOC from our credit union here in Kelowna (Valley First). The house has a 330K mortgage with a value of 600K and they won't do a thing. We have no issues getting approved for new mortgages with the big banks but these guys won't budge. Frustrating for sure.

Not your fault. The new regulations favor more for private lenders. This site clearly states that
"The tightening of these guidelines and restrictions has opened up a channel for private financing since the general public can no longer qualify at all major banks"
Mortgage brokers and lenders can now do business with much more freedom.

 

[Thomas Beyer]

Did you ask the credit union why ? Banks change their rules all the time and withdraw from certain market segments or open up new ones. Perhaps your credit score was below a certain threshold ? Perhaps they decided to withdraw 50% of lending for the city your asset is in ? Borrowing for sure is getting tougher.

 

[MargotBT]

Canadians had until this point one of the highest ownership ratios in the world, if not the highest, around 70%. Both UK, Europe ( about 50%) and US ( about 65%) are lower. Australia and NZ are right up there too in the high 60's / low 70's.

The two main reasons were cheap land and thus house prices and very low downpayment requirements for first time buyers.

Both of these main factors have been changing - bit by bit - over the last few years as house prices have steadily increased and mortgage rules progressively tightened. This latest announcement is the latest - but possibly not the last - step in increasing mortgage qualification rules. As to the actual effect we shall see but as a rule of thumb you will qualify for less and with less money being available interest rates may go up a hair, especially for non-prime high LTV borrowers and likely investors. Actual impact is TBD though.

==> You can still buy with 5% down and you can still use RRSP money for the downpayment.

Existing landlords rejoice as the pool of renters will increase as more will be unable to get the required mortgage they had in mind.

Hi Thomas,

You mentioned Australia, so I wanted to ask you a question. Namely, my future husband is from Adelaide, and I'm planning to move there as soon as possible. We would like to buy a family house, but prices are quite high at the moment...

So, I wanted to know your opinion about the property price trends in 2017. Are prices going to fall or grow? I'm such a newbie when it comes to real estate trends and expectations... Let me know what you think.

Thanks!

 

[Thomas Beyer]

... Are prices going to fall or grow? ...

Yes

 

[Colin Forrest]

Hi Margot,

I have a number of Aussie friends that live in in or near the major centres of Australia (Sydney, Melbourne, Adelaide, Sunshine Coast). As you will undoubtedly discover, Canada is a relatively inexpensive place to live by comparison; and when it comes to real estate, Canada is by and large cheaper. I wouldn't fixate too much on whether or not the market is going to rise or fall. If you plan to become homeowners 'Down Under' then simply buy something that you can afford NOW with ideally 20% down. This will protect you from any potential downturn. That said, based on he conversations I've had with my friends living in Auz, the underlying fundamentals are the same as in Canada via-a-vis immigration, resources, security etc. so the news is positive on that front for price appreciation. First-time home buyers are having the same problems there as at home here in Canada. The Bank of Mom and Dad has become the first port-of-call.