Mortgage Changes , 17th October 2016

BIG CHANGES MEAN BIG OPPORTUNITIES

As many of you may know, on Monday October 3, 2016 the wise and all-knowing Canadian Government dictated that they will be again be changing the horizon of the Canadian Housing Market.  These changes start to take place on Monday, October 17, 2016 and lending institutions have already begun enforcing the new guidelines.  It appears these changes have come around to ‘STABALIZE’ the housing market. 

How will it really affect buyer and their buying power?

Well, we all know that there are lots of buyers out there that just can’t afford to get into this market or are waiting until the market slows down.  If the market slows down, then best of all, there will be no more multiple offer situations!!Back to the good old days where after viewing half a dozen homes, you go in with a fair offer and insist on 5 days of financing. 

For all of those sellers who have been sitting on the fence about selling; speculating that if they just wait another few months, their home will increase in value even more.   They need to sell now and get the maximum amount out of their home. 

The next 2 – 3 years is a crucial point in the housing market and what we do as industry professionals will be important – Benjamin Tal, CIBC Chief Economist

I wanted to also take a moment to reiterate what the real changes are that will impact you in the immediate future:

1. October 17, 2016 – The three Default Insurers CMHC, Genworth and Canada Guaranty, will mandate that anyone with a down payment of less than 20% must qualify for their new mortgage under the Bank of Canada Qualifying Rate.  This is only a slight change as this has always been the case for clients wanting a term less than 5 years or a variable rate mortgage.  This may lower your clients buying power, but as I mentioned earlier, lower home prices are on the horizon.
2. There have been no additional changes by the Default Insurers to the rules pertaining to Beacon Score requirements, amortization and maximum insurable mortgage amounts.  These rules have been in place for over 2 years and in my opinion, did nothing to slow down the market at that time.
3. In an effort to minimize the ‘sweet’ deal that foreign investors have been realizing in the past years, an additional tax, likely in the form of a land transfer tax, will be enforced for all foreign investors.  To ensure that the purchase is compliant with the Canadian laws, all Canadian homeowners will be required to report the sale of their home on their income taxes.  The purpose of this is again to allow the government to tax foreign investors accordingly.  In the opinion of the mass yesterday, one family member, working or going to school in Canada, filing Canadian Income Taxes and living in that home, would eliminate exactly what the government is trying to enforce.
4. The Canadian Mortgage Industry as per the numbers from CMHC, Genworth and Canada Guaranty has a .28% default ratio.  I personally don’t know what the challenge is for the government.  The average First Time Home Buyer, pays $16,200.00 for this insurance and Canada Globally has the lowest percentage of homes being taken back.  However, if they need to share the burden, it is speculated that lending institutions who insure their mortgages will be asked to take on 10 – 15% of the .28% expense.  

Change is inevitable and how we embrace change always makes the difference in our life and in our happiness. 

Stay positive. Stay calm!!!

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