Since the announcement of the new Canadian mortgage rules on Monday, Jan. 17th, most parties in the real estate market have had a chance to weigh in. For the most part, it would appear that the rule changes have been well received.
Canadian Associate of Accredited Mortgages
Jim Murphy, president and chief executive of the Canadian Association of Accredited Mortgage Professionals, said the association supports measures that strengthen owners’ equity in their homes and encourages the reduction of their mortgages. CAAMP is also pleased that there was no change to the down payment requirement as it recommended, he said.
“Rather than reducing the amortization period to 30 years from 35, as the Minister has announced, we would have preferred that the government had required those people seeking 35 year amortizations to meet the same qualifying standards as those with a shorter amortization. We hope the government will revisit this one feature as the economy strengthens,” he said.
Excerpt from article 630 CHED website:
The REALTORS Association of Edmonton thinks the moves are good, but doesn’t think the five year drop in the amortization period will make much of an impact. Ron Hutchinson is Vice President of the Association and says, Monday morning’s move is a better alternative to a jump in interest rates.
“I don’t think it’s a big impact on someone who’s looking at buying a home, rather than putting up interest rates, I think this is a better way of handling the debt load that consumers might have.”
Hutchinson thinks the federal government may announce more changes at some point in 2011.
First Time Home Buyers & Current Homeowners
Many first time home buyers who have not been able to enter the market to this point are hoping the new rules will push the house prices downward by slowing demand. These would of course be home buyers with solid jobs, good income, minimal debt and ability to manage payments that can only be spread out of 30 years. Those who needed the 35 year amortization to qualify will be forced to look at a lower price range or could be shut out of the market all together. About 30% of buyers opted for the 35 year amortization last year.
Current homeowners appear to be mainly concerned about what will happen upon renewal if they already have a 35 year amortization. Typically, as long as you are not changing your loan amount at renewal, you should be able to continue with your original amortization schedule, although you should confirm this with your individual lender or mortgage broker. However, if you need to increase your mortgage via a refinance at renewal, you will be subject to the limitations of the new rules.
Big 5 Banks
Canada’s major lenders are rather nonchalant about the whole thing, according to an article in the Calgary Herald. for the most part, lenders feel that the moves were prudent and well timed and they feel the market should weather the tighter rules quite well.
“You don’t want to wait until a crisis happens and then have to dramatically tighten the mortgage lending rules or borrowing. Then there’s going to be problems.”, says Todd Hirsch, senior economist with ATB Financial in Calgary.
The lenders have remarked that the March 18th deadline will ensure that most of this year’s crop of buyers for the busy spring market will have to qualify under the changes and they agree that the reduced amortization will indeed soften demand, reducing house prices and possibly making it easier for some buyers to enter the market.
Canadian Mortgage Trends.com
Canadian Mortgage Trends (CMT) is a respected website that delivers the latest mortgage news in Canada for homeowners, online mortgage brokers, and real estate professionals. They weighed in on Monday with one of the more negative responses:
“Unfortunately, the government performed this debt surgery with a butcher’s knife instead of a scalpel. That’s because, while reining in higher-risk borrowers, today’s changes simultaneously rip choice away from the majority of highly-qualified home owners. This includes Canadians with excellent credit scores, solid employment, and reasonable debt ratios (i.e. minimal default risks).
Read the full article here and check out their excellent article Mortgage Rule Changes Q&E
To have questions answers pertaining to your particular mortgage, be sure to contact one of our licensed mortgage brokers.