Want to know what’s on the horizon for homebuyers in Canada? Chris Steeves, Ottawa’s Realtor, breaks down what these new upcoming regulations will mean to Canadians.
In recent news, the ‘officials’ over at Canada Mortgage and Housing Corp. (CMHC) said that contrary to expectations of granting hopeful home owners greater access to residential properties, the current environment of low minimum down payments (5% minimum) is exposing the national housing market to greater risk. Local Ottawa Realtor, Chris Steeves, has a question here: on what planet do they believe that making it harder to qualify for a mortgage is going to help first time homebuyers? It would be interesting to hear them explain this one.
“Politicians are tempted to help first-time homebuyers enter the market, but low down payments may be part of the problem, adding to affordability pressures and macro-economic vulnerabilities,” CMHC president Evan Siddall said, as quoted by The Canadian Press and HuffPost Business Canada. Again, I question the logic here. So let me get this straight, they’re going to make it harder for 1st timers to get into the market, and that’s going to help 1st timers get into the market?? Wow. That’s something interesting to try and swallow. If their argument is that they can somehow crash the Canadian markets, and that will help 1st time homebuyers afford a home, well then I really don’t need to say much more here. Just a brilliant approach [sarcasm].
In a November 18 statement, Siddall stated that the time is ripe for regulators to look into raising the minimum down payment to compensate for the disproportionate increase in borrowing and housing demand that stemmed from record-low interest rates. But wait, aren’t they also planning to raise interest rates in the near future as well? What logic says that increasing interest rates and increasing down payment requirements is going to achieve anything other than hurting the multitudes of homeowners across the country. How about the ‘regulators’ stay away from these subjects and let the people operate in a safe manner as they’ve been doing for years. They should ask Chris Steeves what would be a safe and publicly-beneficial way to assist homebuyers and our real estate markets as a whole.
Siddall added that regulators should consider implementing income-based limits on the loan sizes that debtors could qualify for (wait, isn’t that already in place when you have to ‘qualify’ for a mortgage by meeting a number of criteria??). Such a measure would complement the stricter stress test recently introduced by Finance Minister Bill Morneau (which measures a borrower’s ability to service a mortgage on a 4.64 per cent 5-year fixed rate) and last year’s raise on the minimum down payment of a home worth over $500,000 to 10 per cent. It’s almost as if they want to see how quickly they can rush these new rules in to place, so that they can cause a crash. Starting to smell an awful lot like 2007 on Wall Street… Although it wouldn’t be on a scale anywhere near the US in 2008.
“We expect that these macro-prudential policy changes will moderate demand for housing in Canada’s housing markets, limiting price increases and making houses more affordable,” Siddall said. Translation; ‘we expect that the housing markets in Canada will drop under our unfavourable new laws’.
In its recent stress test of mortgage loan insurance and securitization businesses against several possibilities (including a prolonged depression and a new oil crash, as well as sudden fluctuations in the unemployment rate and home prices), the CMHC concluded that it can endure even the worst-case economic scenarios. Great, so why continue to mess with our program?
For more on Canada’s housing markets, real estate, finances, CMHC, mortgage rules, and anything related, you can contact Chris Steeves to get all the inside scoop on what’s really happening.