With new mortgage lending rules about to kick in, brokers’ phones are ringing off the hook with frenzied queries about refinancing—and even purchasing—homes before January 1.
Steve Garganis, a mortgage broker with Mortgage Intelligence
, began reaching out to clients who are due for renewals in the near future immediately upon hearing about the mortgage rule changes.
But as it turned out, he was receiving just as many calls as he was making. While Garganis says this is the busiest he’s ever been, he’s become weary about why.
“The clients that are calling me right now are the ones always thinking about borrowing money, and this is triggering them to make sure they qualify,” he said. “There are people who are taking action and it’s good to see. However, as with earlier, the vast majority of Canadians don’t have a clue what these rules mean.”
Garganis says that many prospective homebuyers have been sitting on the sidelines, waiting for prices to drop, but now they’re rushing to buy before being subjected to 200-basis-point stress tests.
“What’s happening right now is there’s a panic going on,” he continued. “I call it panic buying. People buying because they’re thinking about purchasing homes, waiting for prices to fall, and now they’re saying, ‘Wait a minute, I better jump in because I may not qualify.’ These are people with 20% down payments or more.”
Garganis began client outreach after the Office of the Superintendent of Financial Institutions made its announcement a few weeks ago because, he says, whether clients’ mortgages come due next week, month or year, getting a review is crucial.
Many consumers aren’t aware of the new lending rules’ magnitude because they think they’re exempt, but Garganis says they’re in for a rude awakening.
“Next year we’ll have a big problem where Canadians get up in arms, and it may be too late,” he said. “They’ll say, ‘Wait, I’ve been able to qualify for the last 10, 15 years, so why can’t I qualify now?’”
That’s why during client reviews, Della Dwyer, an Invis mortgage broker and team lead, hammers home the importance of debt reduction. A starting point, she says, is to get rid of surplus credit cards.
“People typically have more than three credit cards, and they need to concentrate on condensing their credit cards from five to one,” said Dwyer. “We have always overspent. I know having credit out there is wonderful, but condense and manage, and don’t leverage so high.”
Dwyer emphatically stated that Canadians need to learn to say ‘no’—especially when banks dangle lines of credit in front of them.
“What you’ve done is just allow that person who has three credit cards to have a fourth, and a line of credit,” she said. “Stop it. If people can refrain from the want-to-have things and stop feeling like they need to have something today, and that it’s okay to save for it and get it in two years, maybe we wouldn’t problems with credit cards and we wouldn’t have the rules tightened on us.
“If banks could stop increasing credit and lines of credit, and the government could leave the rules alone, we’d be far better off. Let them meddle with the banks instead.”
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