Mono-line lender wards govt off mortgage rule changes

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Whoa! says one mono-line exec arguing against additional mortgage rule changes: Today’s “irrational pricing environment” means the government simply hasn’t had time to assess the impact of changes already made.

“What we’ve been experiencing is an artificial market because of the low interest rates and irrational pricing,” Jason Kay, Merix’s VP of sales and corporate development, tells “What the government needs to do is wait for the return of a more normalized rate environment to assess the impact of the changes already made, rather than introduce additional changes."

Kay is among the first mono-line execs to publicly join the chorus of brokers concerned Finance Minister Jim Flaherty will use this month’s budget announcement to introduce a more stringent regime.

On the blotter, say analysts, is anything from lowering the amortization ceiling to 25 years, increasing down-payment requirements to as much as 10 per cent and hiking the cost of mortgage insurance.

Bringing in any of those changes may have only a modest impact on rising levels of household debt given current interest rates on both the fixed and variable side, argue brokers. They also point to a spike in unsecured credit as the real driver of debt levels.

Like Kay, they point to the modest impact changes already ushered in over the last two year have had, including an earlier chop to the amortization cap and the government’s move to peg mortgage qualification to the five-year posted rate.

Those changes would likely have had a pronounced effect on the market outside of the current interest rate environment, suggests Kay.

Any rush to further tighten rules without first allowing rates to return to a more historical range could unfairly saddle the mortgage industry, and the consumers its serves, with long-term consequences stretching well beyond the stop-gap measures the government may be looking for.

“It takes three minutes to make changes and three years to change those rules back,” Kay says.


  • Jim on 2012-03-21 4:54:14 AM

    Has anyone thought been given to setting a limit on how much can be borrowed as a HELOC?

  • Tom D on 2012-03-21 5:34:10 AM

    For too long brokers and bankers have pushed HELOCs on the unsuspecting public, telling them HELOCs are a great product for the average consumer. The last thing most consumers need is a large HELOC pushing them further & further into debt with no fixed repayments. Where have the days gone when we provided prudent advice to our clients & we weren’t obsessed with lining our own pockets!

  • Elfie Hayes on 2012-03-21 5:58:05 AM

    Great comment Jason, I've been saying it all along, it's not the mortgage that's killing people's ability to manage debt. It's the whole "live your dream life" on credit mentality. We all need shelter and the qualifications of GDSR and TDSR are still in line with lending practices of 20 years ago.

    Stop doling out credit cards and unsecured debt and we wouldn't have to choke off one of the few industries that carried us through the recent recession.

  • Angela Wong-Liao, Invis Inc on 2012-03-21 8:23:26 AM

    Thank you Jason Kay of Merix to take the lead speaking out our concerns, I fully agree that our government should wait until the interest rate pricing is normal as the current pricing is exceptionally low, 2.99% for a 4 yrs term or 5 yrs term is completely not realistic, our normal interest rate should be 5% to 5.50%. If our government further tightened our mortgage rules, it will be very difficult for our first time home buyers to buy their first homes.

  • Rob Campbell, Verico The Mortgage Wellness Group on 2012-03-21 3:22:11 PM

    Hiking the insurance premium is completely useless. This won't deter brick and mortar lenders from funding deals and up-selling clients with 3-4 products AFTER their debt ratios work out for CMHC. HELOC's are not for everyone but as Tom points out, they have been easily handed out for too long.
    When the well runs freely, people drink often. Guess what...that well is quickly drying. Clients need to be positioned now to weather the storm ahead, maybe only set at 36-38% TDS regardless of beacon being over 680.
    Values in some areas are going to leave some with very, very few options come renewal. And in turn, us Brokers won't be able to get them out.

  • Gov on 2014-06-18 2:55:06 PM


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