From the Press: What people are saying about the new mortgage rules

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A day after Finance Minister Jim Flaherty announced three changes to mortgage rules in Canada, it appears the overall response from the financial community has been favourable; however, questions still remain, including whether clients must qualify at five-year posted rates or five-year discounted rates. Here''s a roundup of what''s being said in the press:

"The changes reflect reasonable public policy. Our government has taken the opposite tack to what has happened in the United States, where they have tried to attract the maximum number of people to make financial commitments regardless of ability to pay." - Phil Soper, president and CEO of Royal LePage (Toronto Star)

"In our opinion, the announced changes are prudent. They will not dramatically impact housing; but, they will help to cool the market, temper speculation and reduce the risk to personal finances from the inevitable future rise in interest rates. Although the policy adjustments are only to government-insured mortgages, which are for mortgages with less than a 20 per cent down payment, the new rules will probably be applied to all mortgage lending." - TD Economics

"It''s a fine line he (Flaherty) is walking. You have to act in a responsible way in a hot real-estate market, but you don''t want to overdo it and derail it. What he''s done is very surgical, directed to where it hurts rather than an umbrella response." - Benjamin Tal, chief economist, CIBC World Markets (Montreal Gazette)

"Are we going to see the odd borrower have to come up with more money or not buy they house they want? Absolutely. But will it have a dramatic effect? No." -  Peter Majthenyi, mortgage planner, Mortgage Architects (Globe and Mail)

"How the government can go from 100 per cent rental financing (17 months ago) to 80 per cent today is confounding. The intent is understandable, but the government could have increased net worth requirements, increased Beacon minimums, tightened debt servicing guidelines, or limited the number of insured rental mortgages a person can qualify for. Instead, the solution was near-draconian, and it will have an effect on the rental stock in Canada." - Canadian Mortgage Trends

 “The Canadian bond market will probably catch a bid [from the policy changes]. So long as you can take any residual Bank of Canada tightening out of the Canada curve, that will be more beneficial than detrimental towards bond yields.” - David Rosenberg, chief economist, Gluskin Sheff & Associates (Bloomberg)

  • forrwen on 2010-02-18 4:51:09 AM

    I love all this applauding the government's latest bonehead move.

    If mortgage brokers and bankers just did their job properly, those who should never have been buying in the first place wouldn't have qualified and therefore wouldn't be losing their homes.

    There are millions who buy with under 10% downpayment and do just fine.

    A few bad apples spoils the whole bushel.

  • Scott Henson on 2010-02-18 5:12:54 AM

    I wonder what will happen to those that have recently purchased a non-owner occupied rental property when it comes time to renew? If market value has not increased enough to get those to the 20% equity threshold, what then?

  • Scott Henson on 2010-02-18 5:17:04 AM

    I wonder what will happen to those that have recently purchased a non-owner occupied rental property when it comes time to renew? If market value has not increased enough to get those to the 20% equity threshold, what then?

  • vittorio oliverio on 2010-02-18 5:23:17 AM

    while most people agree with the rules changes, again we are punishing the people that should own a house on bases that some idiots do not know how to manage debt. one thing that is very frustrating is that the government keeps telling us that more people are in debt. however what they do not look is what kind of debt to this client have. for example over 65% of individual who I did mortgage for in the last year was to take equity for investment purpose. that is sound strategy. borrow low so you can get higher return in the investment field. there are great investment vehicle in which client can invest with very good returns. what I would like the government or anybody do is find out what kind of debts Canadian have. you would be surprised on the answer. than make a proper decision. we are jumping the gun again. plus as a good mortgage broker, when client redo the mortgage in order to better handle debts, there is a plan attached to it so client can be assured that their debt would not go out of hand.

  • Dave on 2010-02-18 5:23:53 AM

    Once again our socialist nanny state steps in to protect us from ourselves. Where is there a foreclosure crisis in Canada needing this dramatic interference? The housing bubble is a myth based on dramatic sales increases on a year to year basis that saw 2008 numbers of homes literally crash to historic lows. Nothing more is happening other than a return to normalcy.
    What happened in the U.S. has absolutely nothing to do with Canadian real estate. In 2004 the Democrats gained control of Congess and in 2005 they managed to pass the Fair Housing Act. Under the supervision of Barney Frank, the Dems turned it into a giant vote buying machine. With Fanny Mae and Freddie Mac under Barney's control, mortgages were granted to anyone with a pulse. Wall Street packaged all the crap and sold it around the world as mortgage based securities. The rest is history. Those who cannot see this legislation as being another blow to our freedom are the same folks who believe the Human Rights Commissions are protecting us. Wake up Canada. You have every right to be as stupid with your money as you wish without government interference.

  • Chris on 2010-02-18 6:42:17 AM

    Maybe Flaherty should take a look as to why many Canadians are getting more in debt....how about our high taxes; right
    from Federal Income taxes, to Provincial Income taxes (new HST) and property taxes coninually going higher and higher...instead of stopping Canadians from purchasing their dream or using equity to payout high debt loads; he and all other levels should learn to curb their spending.

  • Brian Matthey on 2010-02-18 6:45:45 AM

    Variable rate mortgages should have payments based on the current 5 year best discounted rate in effect at the time so clients have no payment risk and the benefit of potential reduction in their amortization as more payment is contributed to principal during low rate periods.Instead we now have lenders debating to approve based on posted rate or discounted rate-let one decide to approve on posted and others on best discounted and we have a mortgage brokers dream!

  • Brian Matthey on 2010-02-18 6:50:45 AM

    Not many people I know were willing to pay the high CMHC premium in a rental purchase and comply with higher qualification standards-I guess we don't see the high risk speculative rental purchases that the government has seen rise to alarming levels to prompt them to act in this fashion.

  • Brian Matthey on 2010-02-18 6:50:48 AM

    Not many people I know were willing to pay the high CMHC premium in a rental purchase and comply with higher qualification standards-I guess we don't see the high risk speculative rental purchases that the government has seen rise to alarming levels to prompt them to act in this fashion.

  • James Shinners on 2010-02-18 6:55:04 AM

    Real Estate has historically been a good way to improve your net worth and cash flow. Now, unless you are already "rich", it will be very difficult to purchase an investment property. Needing 20% down will take a lot of buyers out of the investment property market. As demand is reduced, supply increases, and home values fall. This leaves more properties for the wealthy with the cash for a big down payment.

  • Brian Matthey on 2010-02-18 7:01:00 AM

    I agree that credit needs to be reined in but it is the abundance of credit cards with high rates and the availability of unsecured lines of credit with never never plan payments that are causing more debt grief than mortgages.Mortgages have been the saviour of many homeowners who have used their equity to restructure their debt loads into more manageable and more responsible debt payment.The 5% reduction will mean that some borrowers will not have enough room to do what they need to do leaving some high interest debt remaining,which is contrary to what the government should be trying to accomplish.Instead of lowering the limit make the income qualification parameters tighter and speak to borrower quality.By the way is the government back to work yet

  • James Shinners on 2010-02-18 8:06:45 AM

    It looks like the banks have successfully convinced the government to take investment property mortgages away from Mortgage Brokers. Mortgage brokers cannot offer their clients a loan or line-of-credit for a down payment like the banks can. As a result, banks will get more business by having a wider product offering.

  • Pamela Wyant on 2010-02-18 8:30:39 AM

    As a mortgage broker, I see people all the time who want to push the limits when it comes to debt service ratios.

    I believe the government is being sensible with their rule changes. Will it make everyone happy? No. Because there will always be people out there that want to buy the most expensive house they can qualify for. There will always be people who love to spend money and max out their credit balances. We know that interest rates have nowhere to go but up...so these people who are at their limits now when interest rates are at all time historical lows ARE GOING TO BE IN TROUBLE when they go to renew into higher rates. Sound vaguely reminiscent to what happened in the US? There's a reason for that!

  • Response to "Nanny State Socialism" on 2010-02-20 5:05:02 AM

    Hi there Finally someone who is not a socialist (there aren't many in canada!) I disagree with a few things you said - not sure if you care though. The biggest socialist mistkake is to have CMHC at all. There is no reason taxpayers of canada (aka CMHC) should have to foot the risk bill for all these canadian buyers who can barely afford a 5% down payment. Yeah down with the socialists! :-)

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