Now that the mortgage industry has had plenty of time to absorb the January budget - all 360 pages and 109 checkmarks - CMP spoke to people in the industry to find out what it means to them. Tell us what you think in the comments section below.
Tax credits and RRSPs
“[The] budget provides enhanced consumer confidence, especially as it affects housing – the largest investment for most Canadians.”
- Jim Murphy, president and CEO of CAAMP, in a statement
“Obviously the optional $25,000 that you can take our of your RRSP, tax free, for a down payment is going to help with first time homebuyers, but I’m not sure about the $1,350 tax credit for home renovations. As an incentive to build this seems pretty ineffective. I would say overall it seems like a budget that favoured big banks.
“I thought the government did a good job of considering a number of different ways to get immediate relief through to consumers, like the raising of the homebuyer program limit to $25,000 or some of the tax credits. I think they’re all good. But at the same time, the real issue in the economy has moved from affordability of homes to ‘am I going to have a job to pay for my home?’ So I think the focus on employment will be key."
- Peter Vukanovich, president and CEO, Genworth Financial Canada
“When the first-time homebuyers plan first came out, it had a tremendous effect on a number of people and their decision about getting into a new home. Anything that raises that withdrawal limit and doesn’t penalize people on an income tax basis is a good thing. I think the home renovation credit is phenomenal because it’s not just about the homeowner, it’s about all the trades that come to work to do the renovations.”
“The home renovation tax credit encourages people who have equity in their homes to not just refinance, but to do it in the next 12 months because the credit expires, which I thought was a very smart idea. Also, I think anything they’ve done to spur new home purchases is going to make a big difference to real estate, and I think real estate has been one of the areas hardest hit.”
"When people build a home or when people remodel a home, they are spending money in other sectors of the economy and that's vital, so we're really pleased to see it directly addressed in the proposed budget."
- John Geha, president, Coldwell Banker (Canadian Operations)
Additional $50 billion of liquidity
“The Insured Mortgage Purchase program is not a program like in the US where government is trying to buy up toxic assets. It’s a program to buy mainstream mortgage pools that are already part of a very robust securitization methodology in Canada, and it allows a banking industry to gain access to capital in a quick and predictable way. But the reality is that not all banks and federally regulated financial institutions get to participate directly with that program.”
“For the big lenders and issuers who have the option to get into the auctions along with the big banks, they will have access to that additional $50 billion of government liquidity, but at a cost that is more than the CMB (Canada Mortgage Bond). And you have to ask what is this incurring debt going to do to the bond market? It will rise, and it’s inevitable that the fixed rate will rise as well – it’s just a matter of when.”
“The government is reacting to things after they happen, and I think in a lot of cases right now, it’s very clear what’s going to happen in the next six, twelve months. They should probably be proactive in their responses by creating excess pools of money to pick up the slack when things do become a problem. I think they should be doing significantly more now to curb the problems expected in the future.”
100% backing for private insurers
“Genworth Financial Canada has approximately $4.5 billion dollars of assets available for potential future claims payment, which speaks to our financial strength and stability now and in the future. For these reasons, we continue to compete for, and receive business from, lenders all across Canada. What has become clear of late, however, is that the global credit crisis has exacerbated the differential between the guarantee purchased from the federal government by Genworth Financial Canada and the guarantee provided to CMHC. Lenders are under pressure to obtain the strongest possible assurances on their credit enhancement, and the 10 percent difference between CMHC and Genworth Financial Canada has impacted lender decision-making. As a consequence, over time, both consumers and lenders will have less choice, fewer products and less price competition if this imbalance is not corrected.”
-Peter Vukanovich, president and CEO, Genworth Financial Canada
"We believe increased competition has greatly benefited the Canadian market and has resulted in a number of positive changes within the mortgage default market, including more affordable premiums, the elimination of almost all mortgage insurance application fees, and product innovations that assist new immigrants and self-employed borrowers. While the current global economic uncertainty has impacted the Canadian market, a competitive dynamic remains important for our industry. We applauded the Government of Canada's decision in 2006 to foster mortgage insurance competition and we will continue to execute on our vision of providing additional choice and flexibility today and well into the future.”
- Andy Charles, president and CEO, AIG United Guaranty Mortgage Insurance Company Canada
"The private insurers are already at 90% so it wouldn’t have been an extraordinary stretch to go to 100%. CMHC has always done a great job, but they did an even better job when competition was introduced. Let’s face it, competition is good. We’d like to see a level playing field because in the long run it benefits the consumers."