Brokers to Flaherty: What more do you want?

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Finance Minister Jim Flaherty’s comments that the full impact of the government’s mortgage rule changes “have yet to be felt,” have some brokers scratching their heads.

“What more does he wants?” asked Paul Sobieski, a 30-year veteran of the industry who works with The Mortgage Group in Vancouver. “Home sales in some of the country’s hottest markets are at their lowest in 20 years already.”

Earlier this week, Flaherty said in a television interview that it was too early to judge the effects of the government’s move in July to limit consumer access to mortgages in an effort to avert a debt crisis. His deputy, Michael Horgan, was also quoted as saying it was “too early to make a direct link” between the housing market slowdown and the mortgage rule revamp.

“That's what scares me, the full impact has not been felt yet,” wrote one MortgageBrokerNews.ca reader in response to Flaherty’s comments. “I think there is a bigger slowdown coming and we will run right back into recession, by February 2013 or earlier.

Mortgage brokers also argue the finance minister’s statements somehow bolster their point that the market was already slowing down before the feds announced the new mortgage rules. More urgently, they say, further efforts to cool the market run the risk of damaging the economy.

“The government was putting out a fire that was already dying,” said Sobieski. “The industry usually experiences a five year upswing and then flattens for about three years we had been up for an unusually long 10 years and were headed for a correction anyway.”

For instance, he said, home prices in the previously hot Richmond, B.C. area have gone down 20 per cent compared to last year. Broker business in B.C. has taken a similar hit for many industry players, falling by as much as 35 per cent.

“I think Flaherty should back off now,” Sobieski said. “Further tampering could lead to a recession.”

  • Elfie Hayes on 2012-11-02 4:15:46 AM

    Same rules of spending cuts that consumers are told to practice do not apply to Government spending.

    Remember Jim has a country estate in the heart of Whitby, why would he care if regular Canadians can't buy a house. He has no desire to lead by example. The Government keeps spending and we bear the brunt of the pain. Remember to vote differently next time folks!
    If this link does not work, cut and paste it into your browser!

    http://business.financialpost.com/2012/11/01/canadian-goverment-debt-has-risen-much-faster-than-household-debt-since-2008/

  • Christopher on 2012-11-02 4:19:01 AM

    This former ambulance chaser lawyer always leaves me scratching my head. I don't know who he was listening to (if anyone) before making the wrong changes to mortgage underwriting, but I suspect it was his barber.

    Proven ability to service debt (character/capacity) should be the first priority of underwriting, not how long it takes to pay off an asset(collateral) that increases, rather than decreases in value.

  • Phil McDowell on 2012-11-02 4:48:27 AM

    Although Default insured mortgage rules gets the media attention, watch for increased pressure from OFSI on lenders to underwrite income, credit, borrower equity and property values throughout the amortization of a mortgage. It's back to basics and opportunity for non-Federally regulated lenders/investors.

  • MP on 2012-11-02 6:04:51 AM

    I really think the government show crack down on credit card companies who give anyone with a pulse a credit card. I see way too many people with way too much unsecured debt.

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