The government’s recent mortgage rule change has had a disastrous effect on both first-time homebuyers and the mortgage industry as whole, says one industry insider.
The Principal Broker of Mortgagepedia Inc., Annie Mirza, says the intervention has particularly hurt monoline lenders who can no longer backend insure refinances or purchases over $1mln, but the confusion has encouraged first-time buyers to seek out more broker advice. Still, the industry has been left reeling.
The primary advantage brokers have, says Mirza, is their ability to help first-time buyers structure alternative solutions to structuring mortgages, and many bring their parents on as co-signors or guarantors.
“The intervention has increased business on one side – people are seeking professionals more – but it’s affected business adversely by restricting monoline lenders with what they can and can’t do,” she said. “I think the government needs to take a few steps back and listen to our industry, and the information and facts we’re providing. In the refinance market, there are a lot of people taking out high-interest private money because getting low-rate institutional money has become difficult with the restrictions on monoline refinances. The government needs to take a few steps back and reevaluate the steps they’re taken till now and consider not making it more difficult than they already have.”
She says the intervention has slammed the door shut on many first-time buyers.
Joe Walsh, the principal broker of Dominion Lending Centre Bedrock Financial Group, says rising borrowing costs and stringent mortgage regulations are forcing first-time buyers into small condominium units.
“They’re already being forced into condos,” said Walsh. “Historically, it’s always forced them out of the city, but if you’re within an hour’s drive of Toronto, prices are already out of range for a lot of them. Developers are basically just building smaller condos, so the entry-level is $350,000 or $400,000 or $500,000 and they’re going to build 480 square foot units, trying to hit the sweet spot for those entering the market.”
As difficult as entering the market has been for younger buyers, Walsh is confident they’ll always aspire to become homeowners. In spite of the restrictions on buyers, interest rates, even if they climb, are still low relative to historical rates.
“They’ll always want to buy,” he said. “Even with rates rising, they’re still so low. You know what your cost is going to be for five years (on fixed mortgage). There’s still a historicallt low rate and you know what the payments are. Homeownership is about controlling your environment, but when you’re renting you’re not in control.”