Further tightening coming?

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The government will reportedly set its sights on the big banks in its next bid to minimize risk in the housing market, but one industry veteran believes the banks may put up a fight.

 “The government could consider increasing banks’ capital retention requirements or removing the securitization aspect of their mortgages … which would increase their risk,” Ian Murray, a broker with The Mortgage Centre, told MortgageBrokerNews.ca. “If that were the case, I could see the banks crying foul; I can’t imagine the government kicking the banks in the knees like that.”

OSFI announced Friday it is planning to update the regulatory requirements for bank mortgages.

“The planned changes to the regulatory capital framework will ensure that capital requirements keep pace with those developments and reflect underlying risks,” OSFI said.

However, the planned change is far from a done deal. The regulator said it will consult with federally regulated financial institutions and other stakeholders before implementing any changes.
Also on Friday, both CMHC and the Finance Minister announced policy changes in separate bids to reduce the government’s exposure to the housing market.

Finance Minister Bill Morneau announced new down payment rules for government-backed mortgages on Friday morning.

The minimum down payment for new insured mortgages will increase from 5% to 10% for the portion of the house price above $500,000, the finance ministry wrote.

CMHC, meanwhile, announced Friday an increase in fees for National Housing Act Mortgage-Backed Securities and Canada Mortgage Bonds.

“Guarantee fees and annual issuance limits allow CMHC to facilitate the supply of reliable mortgage funding in Canada while managing the Government’s exposure to the housing sector” Wojo Zielonka, Senior Vice-President, Capital Markets, said in a release. “The revised fee structure is intended to encourage the development of private market funding alternatives by narrowing the funding cost difference between government sponsored and private market funding sources.”

But it seems the government may not be finished meddling with the mortgage and housing industries.
  • Matt on 2015-12-15 9:12:30 AM

    National Bank increased its capital ratios 6 weeks ago, and last week, Laurentienne Bank. This happenned before this accouncement, which is curious. Maybe banks are trying to play nice for fear of getting even higher capital ratio requirements forced on them. I met a high-up at TD this weekend and he tells me there are a lot of layoffs because higher capital ratios will make it harder for them to maintain their ROE. 2015 might have been the profit inflection point for our banks.

  • Debbie on 2015-12-15 12:15:10 PM

    Real Estate, the only thing driving the economy, yeah lets ruin that too!

  • Kate on 2015-12-15 1:48:24 PM

    tightening credit card rates and limits might be something the government should take into consideration. people need to have housing, rent or mortgage payments will be a constant but not credit card debt! how does a person save for a down payment when rental rates are as high or more than a mortgage payment .. now the down payment will be even higher for large centres. there are other factors in play that push the price of homes out of reach for hard working canadians just trying to buy their first home,, but I think the government is more focused on what makes them money.. how much of our property is bought by foreign investors????

  • Jess on 2015-12-16 4:21:43 PM

    Please don't take this personally Debbie or Kate... but your comments show that you do not understand the industry, economics, or the reality of what is happening today. I am seriously hoping that you are not mortgage brokers, because this is very basic stuff to know if you are. Any broker should know this, if you don't... you should not be a broker.

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