Happy anniversary? It’s been a year since the mortgage rule changes took effect, and brokers have felt the impact not only on their business, but especially their clients.
“We are finding a lot of people no longer qualify based on 25 years amortization or have to cut the purchase price back, which is easier said than done, depending on the market where you intend to purchase,” says Nicole Drummond, a mortgage broker with DLC
The Mortgage Source. “The new regulations have impacted the consumers who are purchasing and do not have the 20 per cent down payment.”
Another broker agrees that Finance Minister Jim Flaherty
’s amortization restrictions have had an impact.
“If Flaherty’s intention was to push some of these first-time buyers to the sidelines, he has succeeded,” says Ron Butler
, of Verico
Butler Mortgage. “The self-employed Canadian has taken it on the chin in the last 12 months as the original rule changes and subsequent OSFI changes have tightened the screws on those in business for themselves.”
Although sales and volume may be up, brokerages are working a lot harder for less pay, Butler points out.
“In our own business our unit sales are massively up year on year, 39 per cent, and our overall loan volume is way up as well but due to our rate-discount strategy our income is flat year on year,” Butler told MortgageBrokerNews.ca. “So the net effect is we are working much harder for less pay as our salaried staffing increased to handle the unit volume surge.”
The major restrictions put in place by Finance Minister Jim Flaherty were to cap amortizations at 25 years, and limiting refinancing from 85 to 80 per cent of LTV.
Andrew Galea, a mortgage agent with Calum Ross
Mortgage, has seen many clients moving to fixed rates to qualify for a mortgage.
“The new rules have limited the various opportunities for the consumer, that is, they have forced many of them to take a fixed rate term of 5 years or longer so they can avoid the dreaded MQR (mortgage qualifier rate) currently at 5.14%, which limits the total credit available to the first-time homebuyer by 25% or more,” says Galea. “The major impact of the new rules have affected the self-employed as the insurers are asking for more supporting documents to substantiate their stated income—CMHC requires proof of income for BFS clients that have been in business for two years or longer, whereas Genworth
doesn’t have this requirement but the income must be reasonable for their particular profession.”
Brokers and agents immediately saw the effect on first-time buyers, even before the rules came into effect.