A quick update on the latest mortgage news and trends
Our good friends and colleagues at MortgageJake update us on the latest mortgage news.
This week saw two dramatic moves by Jim Flaherty that directly impact us in the housing sector. The first was his bold ask of Manulife to not discount its mortgage rate and as a matter of fact, raise it back to above 3% after setting it at 2.89%. The second and perhaps more subtle move was yet another mortgage rule change as of yesterday’s Budget announcement: limiting bank’s reliance on mortgage insurance for loans.
This will mean simply it will be tougher to get approved for mortgages in Canada for two reason:
1) By limiting the exposure to CMHC, Genworth and Canada Guaranty-insured loans, banks will be forced to self-insure. By doing so, guidelines will tighten even more than they already have but each lender will determine their own policies. By self-insuring, lenders will pass the cost onto the borrower. By passing the cost, even though rates may not go up, who cares how low they are if it’ll be tough to get a loan?
So you’re probably thinking “not so bad, because people with +20% down won’t be affected”
2) Wrong. Many lenders insure mortgages at 20% down or more even though the clients don’t see the costs. Reason being is when they are not backed by deposits they need to minimize risk. Even on deals with 35%+ down lenders go to CMHC et al to get those deals insured. Its how we avoid appraisals sometimes, and how lenders are so willing to do borderline deals.
How does this impact you?
In the short-run, it won’t. It’ll be business as usual (for now). We won’t see a deadline like we did with the last four mortgage rule changes. That being said, if you pair these belt-tightening moves with an increase in rates and you may see a further slowdown in the housing market than what we’re already seeing but in terms of prices. At least that’s my take. I’m not calling for the sky to fall, I am simply saying that things may change in the future.
Even though BMO was advertising to be the first lender in Canada that had 2.99, the truth is I was offering 2.99 to borrowers in November. If you are a smart and savvy borrowers hell-bent on working with the banks, speak to me for a second opinion for free. It won’t hurt but it may help you save thousands.
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Ilan Joseph is a Real Estate Broker with Sutton Group and is co-founder of a 10-person award-winning Toronto real estate team. You can find him on Twitter, YouTube and Google+. For over 10 years, Ilan has provided more than 1400 buyers and sellers valued advice and service, enabling them to reach their real estate goals. He’s kind of like the Bruce Willis of real estate.