Proposed Changes by the Office of the Superintendent of Financial Institutions
The Office of the Superintendent of Financial Institutions (OSFI) has suggested some changes to the mortgage regulations, most of which are very scary. In a nutshell here they are:
Cash back mortgages could disappear
HELOCs would have to be amortized, no more interest only payments. Then this wouldn’t actually be a HELOC anymore but a regular installment loan.
HELOCs would be reduced to 65% of the property value from the current 80%. If you’re an investor, this could really affect you.
Home owners would have to re-qualify at renewal time. How crazy is this? You’ve never missed a mortgage payment but now that your mortgage has matured, you have to go through the whole application process again, including getting a new appraisal. To me this is the scariest of all! This would affect EVERY mortgage holder.
A borrower’s age may be taken into consideration at time of application. You may be “too old” to get a mortgage. If the lender thinks you don’t have enough years left in you, watch out! They can decline your request. This is so dumb it’s almost funny. What if a 70 year old who takes great care of themselves, eats well and exercises regularly, wants to buy a house, or maybe a second home, or cosign for their adult child, but because they’re “too old” they get turned down. Who determines how old is “too old”? This is totally bordering on socialism. This could be taken even further. Are they going to start asking people about their lifestyle? Are they overweight, have any diseases or health issues that could affect their lifespan? This is a free country and if a senior wants to get a mortgage and can qualify like everyone else, then where’s the problem?
The question is why does OSFI feel the need to make these changes? Oh yes, consumer debt is too high they keep saying . And we don’t want our housing situation to end up like the US. Well, who was it that lowered prime to its current level? That would be the government. And they did that to encourage borrowing. Hmmm.
Recent 2012 stats show that the national mortgage default level is at .38%, where credit card default levels are a little over 1%. Approximately 1/3 of personal debt is non-mortgage debt. That’s a fair amount, yet where are the regulations for the credit card companies? Now this is an area that really needs regulating. Can you say 28% interest rates? This and payday loan type places.
I will keep you apprised of any mortgage changes as I hear them. But I’d encourage you to make your voice heard about these crazy proposals.
Bank of Canada-Raising Rates because of Consumer Debt?
If the Bank of Canada wants to raise rates to keep consumer debt levels low, well, they don’t have to. According to Genworth Financial, a privately owned mortgage default insurance company, the consumer applications that they’ve been receiving are indicating that Canadian home owners (or would-be home owners) are paying off their debt.
And a number of economists feel the same way. “The pace of growth in household credit is no longer a reason for the Bank of Canada to move from the sidelines any time soon,” says Benjamin Tal, deputy chief economist at CIBC World Markets.
He wrote a report released Wednesday that suggests central bank intervention is not needed, especially with consumers already seeing interest payments on debt eating into 7.3% of their disposable income as of the fourth quarter of 2011, even at today’s low rates.
“Why are you raising rates? To slow down credit growth — but it’s already slowing,” Mr. Tal says. “I say let the market slow naturally. We are so concerned about this but it’s moving in the right direction.”
Toronto-Dominion Bank economist Francis Fong also weighed in, suggesting Canadians have begun to get the message about having too much debt, based on the slowdown in consumer credit growth.
Even the chief executive of one of the big five banks joined the discussion, hoping to extinguish some of the panic about Canadian debt.
“When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable,” said Gord Nixon, chief executive of Royal Bank of Canada “Frankly, I’d like to see the rhetoric come down a little bit.”
Stay tuned to see how the Bank of Canada reacts to the slowing debt load.
Zero Down Payment Mortgages Still Available
If you’ve been trying to save for a down payment to purchase a home but find that it’s just not happening, you may be eligible for 100% financing. There are still a few financial institutions that will include the 5% cash back in your mortgage. And with rates so low today, this is a lot more affordable than a few years back.
You must have verifiable income and strong credit to qualify. Also the legal fees & land transfer costs are also your responsibility. But if you are a first time home buyer, then the government is rebating your land transfer costs.
This is a great program to help you get into your dream home. For a free consultation, contact us today.
FREE Online Home Valuation Tool
Thanks to increased technology, home owners or would-be home owners, can now get an idea of their home value. Zoocasa offers a free online service call Zoopraisal. You enter the address of the property you’re interested in, plus a few other details such as square footage, and voila! it gives you an approximate value.
This is a great tool to get an idea of what the typical house value is in the neighbourhood you’re interested in. Of course your property may not be the same value since a lot has to do with upgrades. But this tool is a great starting point. Check it out at www.zoocasa.com .
Rental Property Financing Woes?
Are you in investor with several rental properties and are being turned down for financing because your bank says you have “too many”? If this sounds like you then you’ve come to the right place. We deal with lenders who have no maximum on the number of rental properties that a borrower can own.
In addition, the rental revenue and expenses of the rental portfolio aren’t even factored into the debt servicing for the purchase or refinance of the subject property. This is good news because the way many lenders calculate the rental offset often leaves a shortfall, on paper. Therefore it is much more likely to qualify for a mortgage.
If you’d like any more information on how this program may work for you, please contact us today for your free consultation.
Bank of Canada Leaves Rate Alone
The Bank of Canada met this week and left the bench mark interest rate unchanged at 1%.
Mark Carney has suggested the rate will remain unchanged for some time to come as the outlook for the global economy remains somewhat bleak.
Although Canada’s economy appears to be growing again, Carney said exports will be a “major source of weakness”. This is good news for consumers looking for low rates. If your mortgage rate is 4% or higher, you may want to consider switching to a variable rate. The cost to break it could very well be recouped in a few months. Contact us today for a free consultation.
Low Interest Rates for Some Time to Come?
Here is a very encouraging excerpt from a Reuters newsclip regarding the Bank of Canada’s position on interest rates:
OTTAWA (Reuters) – A day after raising expectations it would increase interest rates soon, the Bank of Canada said it might keep rates below their normal long-run levels even after the Canadian economy is back to full capacity, and future rate hikes would likely be gradual.
In a report on Wednesday, and in remarks by Governor Mark Carney, the central bank took pains to say that, as the economy approaches full capacity in mid-2012 and inflation converges on its 2 percent target, markets should not assume interest rates will necessarily rise as quickly to more traditional levels above inflation by then.
“You cannot mechanically assume that because the output gap on our projection — the output gap is closed in the middle of 2012 — that the bank’s target interest rate will be back at neutral, however you define neutral,” Carney said in a news conference.
“And in fact, I said further and I’ll reiterate it today, that if it were, then the output gap wouldn’t close over that horizon and inflation would not be back at target. And why is that? Well, there are considerable headwinds in the Canadian economy.”
The strong Canadian dollar, weak U.S. recovery and the European sovereign debt crisis are the major risks to Canada, he said.
Prime Rate Remains Unchanged
The Bank of Canada left the prime rate alone today. This is great news for those consumers with debt. The next meeting date is Sept 7/11.
Fixed rates have dropped recently after a brief increase. Let’s just hope the U.S gets their debt scenario sorted out soon, as this could have a definite impact on us in Canada.
