Forums – What do you think about Flaherty’s new mortgage rules? | The Globe and Mail

What do you think about Flaherty’s new mortgage rules?

posted at 2/16/2010 12:50 PM EST on theglobeandmail.com

*Moderator*

Posts: 19
First: 12/1/2009
Last: 2/24/2010
Finance Minister Jim Flaherty has announced tighter lending standards for mortgages, saying that while the housing market is healthy and there’s no solid evidence of a bubble, the moves are needed to “help prevent negative trends from developing.”

Under the new rules, all borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.

Also, the government is lowering the maximum amount Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent, and requiring a 20 per cent down payment for government-backed mortgage insurance on “speculative” investment properties.

Do you think the new rules were necessary?

Will they effectively discourage Canadians from taking on too much debt?

2

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/16/2010 1:41 PM EST on theglobeandmail.com

Posts: 3
First: 1/15/2010
Last: 2/16/2010
I believe that the new rules are very good. The speculative and refinancing is particularily a smart move in order to try to create stability in the housing market. New rules for downpayts and qualifing on basis of 5 yr fixed rate is also a positive factor. However even existing 5 yr fixed are preety low as when rates do start to go up the 5 yr will probably increase even faster than the variable. Although alternatively I would hope that those faced with an increase will not wait to fix their mortgage at an affordable amount. I remeber the 1980, 1981 problems as I was a Banker back then.

3

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/16/2010 4:08 PM EST on theglobeandmail.com

Posts: 1
First: 2/16/2010
Last: 2/16/2010
Good move! This will help avoid a real estate meltdown as witnessed in the united states.

4

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/16/2010 6:41 PM EST on theglobeandmail.com

Posts: 2
First: 2/16/2010
Last: 2/18/2010
Considering the frenzy in Toronto and Vancouver especially, I don’t think the new rules are enough. Flaherty should have gone back to 10/25 like it was before! Why are gov’t meddling in so called free markets? He should have changed the mandate and rules at CMHC. We as the taxpayer are on hook for billions via CMHC if the market starts moving South, and considering the cost of houses vs. income, how high can they go before people realize that this is crazy! High prices in real estate take away from other revenue producing sectors of the economy, no wonder we have such a low productivity in Canada … this will blow BIG, I saw it 3x in my life and this one is a biggie! Do people know about Austrian school of economics or is everyone Keynesian now? Food and shelter is all we will be working for soon if these prices keep going this way … is the media blind to keep this ponzy going?

5

David Rosenberg discussion

posted at 2/17/2010 5:38 PM EST on theglobeandmail.com

*Moderator*

Posts: 19
First: 12/1/2009
Last: 2/24/2010
The chief strategist for Gluskin Sheff + Associates Inc. will take your questions about his views on the housing market at 10:30 a.m. ET on Thursday Feb. 18.
Please join us!

http://tgam.ca/I1l

6

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/17/2010 11:34 PM EST on theglobeandmail.com

Posts: 3
First: 2/17/2010
Last: 2/17/2010
In Response to What do you think about Flaherty’s new mortgage rules? :

Finance Minister Jim Flaherty has announced tighter lending standards for mortgages, saying that while the housing market is healthy and there’s no solid evidence of a bubble, the moves are needed to “help prevent negative trends from developing.”

Under the new rules, all borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.

Also, the government is lowering the maximum amount Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent, and requiring a 20 per cent down payment for government-backed mortgage insurance on “speculative” investment properties.

Do you think the new rules were necessary?

Will they effectively discourage Canadians from taking on too much debt?
Posted by Claire Neary

7

Why doesn’t the Finance Minister stop beating around the bush and target the real culprit behind rising mortgage debt load?

posted at 2/17/2010 11:35 PM EST on theglobeandmail.com

Posts: 3
First: 2/17/2010
Last: 2/17/2010
Canada Mortgage and Housing Corporation ‘(CMHC) 2009 Housing Observer shows that average house price in Canada was $163,992 in 2000 and reached $303,594 in 2008, a whooping increase of 85 per cent. This is an increase of just over 9 per cent per year. The latest data from CREA shows average house price in Canada went up to $337,000 in December 2009 keeping pace with the price increase since 2000. At the same time, median household income after tax went up by less than 3 per cent a year during 2000-2006, a trend that most likely continued in 2008-2009. Therefore, household income after tax that underpins the ability of households to pay for their homes was 6 per cent a year less than the increase in average house price. Job growth was limited to under 2 per cent a year over the same period. Five-year mortgage rte dropped by 1.50 per cent over the same period. The sum of increases in income (3 percent), job growth (2 per cent) and lower mortgage rates (1.5 per cent) add up to only 6.5 per cent annual growth, a far cry from 9 percent increase in house prices, clearly demonstrating that economic fundamental do not justify house price increases in the last ten years.

Another angle is to examine mortgage load and mortgage payment. CMHC’s 2009 Observer shows the mortgage debt ballooning from $431 billion in 2000 to $871 billion in 2008 (it more than doubled) and Bank of Canada’s Weekly Statistics shows it has grown to $ 956 billion in 2009 an increase of over 9 per cent a year from 2000 to 2009. CMHC has insured This crippling debt load means that payment on these mortgages rose from just under $42 billion a year in 2000 to over $82 billion in 2009 based on five-year mortgage term and 25 year amortization period. For an average priced house the annual mortgage payment went up from $15,000 a year in 2000 to over $24,000 a year or an increase of about 7 per cent a year per cent based on a 25 year mortgage loan with 5 per cent down at the 5-year mortgage rate. In other words where incomes went up by 3 per cent between 2000 and 2009 mortgage payments went up by 7 per cent a year over the same period.

More importantly, taxpayers are on the hook for over $296 billion in NHA MBS alone that CMHC has guaranteed plus millions more in residential mortgages insured by CMHC.

It is time that Government of Canada reins in CMHC that has been behind this explosive growth in mortgage lending. Lenders will have never lent this much to borrowers if their mortgages were not insured by CMHC whose debt is guaranteed by the government and the taxpayers ultimately. With nearly $340 billion in liabilities, CMHC has become a major source of concern for all Canadians. CMHC has become too big of a player in financial markets for the government to allow it to fail if the housing market tumbles; The faith of government backed mortgage insurance and securitization organizations such as Fannie Mae, Freddi Mac, and Ginni Mae in the U.S.A.in the last few years should set off alarm bells at the halls of power in Ottawa. The government should rein in the excessive risk taking behaviour of CMHC before it is too late.

The insurance business is best left to well regulated private insurance companies; the government should sell off CMHC insurance business and its financial securitization business to the private sector and concentrate on its role in housing rather than securitization.

8

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/19/2010 12:03 AM EST on theglobeandmail.com

Posts: 2
First: 2/1/2010
Last: 2/19/2010
I totally agree with you when you say: “this will blow BIG, I saw it 3x in my life and this one is a biggie!” And I also agree with you regarding Flaherty has not done enough – nor – fast enough to stop this downhill spiral.

In Response to Re: What do you think about Flaherty’s new mortgage rules? :

Considering the frenzy in Toronto and Vancouver especially, I don’t think the new rules are enough. Flaherty should have gone back to 10/25 like it was before! Why are gov’t meddling in so called free markets? He should have changed the mandate and rules at CMHC. We as the taxpayer are on hook for billions via CMHC if the market starts moving South, and considering the cost of houses vs. income, how high can they go before people realize that this is crazy! High prices in real estate take away from other revenue producing sectors of the economy, no wonder we have such a low productivity in Canada … this will blow BIG, I saw it 3x in my life and this one is a biggie! Do people know about Austrian school of economics or is everyone Keynesian now? Food and shelter is all we will be working for soon if these prices keep going this way … is the media blind to keep this ponzy going?
Posted by freedomV

9

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/21/2010 8:12 AM EST on theglobeandmail.com

Posts: 1
First: 2/21/2010
Last: 2/21/2010
I think its been well said here that the new rules will not have any impact on the overblown mess that is Canadian residential pricing. What is really needed today is a 25-50 basis point rise in the mortgage rates immediately. All this will do is push the market further until the new rules come into effect.

10

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/22/2010 4:06 PM EST on theglobeandmail.com

Posts: 4
First: 2/22/2010
Last: 2/22/2010
too little too late, we are headed for the same fate if not worse than the US. Flats created the bubble, denied it existed and is now trying to fix it… total joke. Why did he have to fix something that in his mind did not exist? Shows total ineptitude.

11

Re: What do you think about Flaherty’s new mortgage rules?

posted at 2/23/2010 1:14 AM EST on theglobeandmail.com

Posts: 5
First: 12/22/2009
Last: 2/23/2010
Maybe people will stop buying real estate when the stock market is predictable and stable.

Posted via web from Toronto Real Estate News | Blog

Advertisements

About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: