Uninsured mortgages raise IMF eyebrows

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A phenomenon that brokers have already started to question is raising eyebrows at the IMF, now suggesting that the growing use of uninsured mortgages could pose a problem.

The report, which was published Wednesday, says: “Across market segments, single-family homes are a major source of price increases, and there are signs of overvaluation, especially associated with high-end buyers (reflected by uninsured mortgage credit growth).”

However, the report provides a national overview of the Canadian housing market, rather than digging down to the regional level.

“The IMF report is very high level,” says Lorne Burns, national industry leader of real estate at KPMG. “It doesn’t really address anything about the regional diversity of the markets in Canada and even within those markets.

“The Vancouver market, for example, has a very expensive high end, but still has pockets that are more affordable.”

The report also highlights deeper downside risks to growth amplified by high household balance sheet vulnerabilities and a sharper than expected correction in house prices

“If you look at housing affordability, there are two concerns,” adds Burns. “One is that debt levels are very high, as [the report] said, 150%. And affordability right now, because of interest rates, is actually at the most affordable it’s been in a long time. Until interest rates move up, we won’t have a change in affordability.”

  • Holly on 2014-11-27 2:39:16 PM

    The headline says "Unsecured" Mortgages ... is that not meant to be "Uninsured"?

  • @kiltedbroker on 2014-11-27 2:42:51 PM

    Great question Holly, I was wondering exactly the same thing. It was the headline that caught my eye for sure...

  • Holly on 2014-11-27 2:47:28 PM

    Exactly! "Unsecured" mortgages should raise more than the IMF's eyebrows!

  • @kiltedbroker on 2014-11-27 2:48:16 PM

    I would be interested in securing one of those for myself! lol

  • Kuldip S Panesar Homeland Mortgage Corp. on 2014-11-27 3:04:44 PM

    What does it mean unsecured mortgage ? If it is unsecured then it is not a mortgage . Let the IMF make it clear the unsecured mortgage ..........

  • Angela Wong-Liao - Invis on 2014-11-27 9:24:37 PM

    I believe "unsecured mortgage" means our real estate market is overvalued at this time and with all time low interest rate, the mortgages that lenders put on their books at this time may become over 100% financing when real estate value dropped, especially when interest rates started to increase in future. This happened 1990 to 1996, the last Ontario recession, real estate properties that were appraised in 1989 were substantially higher, some properties dropped by 40-50% during our last recession. The property value differences becoming "unsecured mortgages".

  • Ray on 2014-11-28 8:13:40 AM

    Yes, I don't get it!

  • Mary on 2014-11-28 9:10:50 AM

    Don't you get it? It's simple Uninsured or Unsecured = Canadian Real Estate Circus.

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