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New Mortgage Regs Could Lower Borrowing Power

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Posted by Kyle Green

on Monday, 06 November 2017 12:56

jangaWell, we knew this was coming. Somewhat. After a lot of deliberation over the spring and summer, the Office of the Superintendant of Financial Institutions has come out with new regulations that will make it harder to qualify for mortgages once again. There are a few changes, most which are minor, but one major change that will impact about a large number of borrowers in Canada. These changes will be coming into effect Jan 1, 2018.

  1. For conventional mortgages (20% or more down payment or equity) the qualification rate for all terms is now either the Mortgage Qualifying Rate (MQR, currently 4.99%) or 2% higher than the rate, whichever is higher.
  2. Lenders are to enhance their Loan-to-Value ratios (the percentage of the home value you can obtain financing for) so they are reflective of the local housing market. For example, smaller communities may find they have more limited options as these are considered higher risk.
  3. Lenders will be restricted from offering combination mortgages (1st and 2nd combinations) to circumvent guidelines. Some lenders for instance would offer a 1st mortgage to 75% or 80% and a 2nd to 85% which allows them to qualify the 1st mortgage using their own looser guidelines instead of tighter insurer guidelines.

How do these rules affect you?

The most important of these is of course the reduction in borrowing power with 20%+ down. With the new rules, buyers will find their borrowing power stripped by about 20%. In Vancouver, where home values often exceed $1mil, this could reduce borrowing power by $200,000 or more! Although there has yet to be official word on whether contracts written prior to Jan 1, 2018 will be grandathered under the old rules, we expect they will follow previous protocol and those with existing contracts will still be able to qualify under the old rules.

Also, interestingly, Credit Unions are provincially regulated and are not affected by these changes. We have been doing a lot of business with Credit Unions since 2012, when the mortgage changes really started coming fast and furious. As of right now, the Credit Unions will still be able to qualify you after Jan 1st under current guidelines. But it is important to note that once the Credit Unions get flooded with a ton of business that the banks can’t do anymore, they are likely to scale things back to  balance their books like they have in the past. They may do this by either changing/reducing policy or by surcharging certain products (like 35 year amortizations for instance).

What do you need to do NOW?

  1. If you have a pre-sale that completes later than Dec 31,2017, we NEED TO TALK! We want to make sure you are grandfathered as you may not be if you do not have an application in before the new rules come into effect. We may also be able to secure a long term rate hold for you.
  2. If you need to access your home equity for any reason in the next few years, you should consider refinancing now. You may want cash for a number of reasons:
  3. Renovations
  4. Access to capital for future investing in real estate or other investments
  5. Early inheritance for your children to purchase their own residence
  6. Self employed borrowers looking to increase liquidity
  7. If your renewal is coming up soon
  8. If you are planning on purchasing something soon with 20%+ down. You should get pre-approved now and start shopping unless you have a lot of breathing room between what you qualify for and what you plan on buying.

Summary

Well, the government is at it again. But what they are trying to do is slow the housing marketing without having to use interest rates as a tool, as raising rates would negatively impact many other things, particularly commodity exports.

The key to remember here is that although it is making it harder to OBTAIN the asset, these rules are being put in place to PROTECT your asset value from a meltdown like what happened down in the US. The more qualified buyers are, the lower the chances of a real estate crash.

Call us today to learn more about how these rules affect you and create a plan of action. Time is low, so it’s important you take action today. 604-229-5515, Kyle@GreenMortgageTeam.ca.



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Real Estate

Census data sheds light on rental supply

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Posted by Canadian Real Estate Wealth

on Friday, 27 October 2017 06:24

iStock-639109564-people-walking-census-cityThis week’s census data revealed Canadians’ changing living habits – and the trickle-down effect that’s affecting the rental market and its existing stock in Toronto.

Only 50.2% of Millenials own their own homes, compared with 56% of boomers who owned when they were that age, according to the Census. However, Phil Soper, president and CEO of Royal LePage referred CREW to a summer study the organization commissioned on peak Millenials (aged 25 to 30) that found 87% believed homeownership was a positive thing and intended to someday own a home, and in which 69% said they intended to buy a home within five years.

“If you compare that to Stats Can data, it shows people are leaving their parents’ homes later, staying in school later, and essentially growing up at a slower rate than their parents, which makes perfect sense,” said Soper. “With technology and increasing lifespans, the old standard of when we got married and left the house got stretched, so it makes perfect sense to me.”



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Real Estate

Canadian Housing Starts - City and Provincial

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Posted by Brian Ripley's Canadian Real Estate Charts

on Wednesday, 18 October 2017 05:24

Screen Shot 2017-10-18 at 7.38.10 AM

“So far this year, all regions are on pace to surpass construction levels from 2016 except for British Columbia, where starts have declined year-to-date after reaching near-record levels last summer.” “The trend in housing starts for Canada reached its highest level in almost five years”, said Bob Dugan, CMHC’s chief economist. 



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Real Estate

Canada 6-City Housing & the Plunge-O-Meter

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Posted by Brian Ripley's Canadian Real Estate Charts

on Thursday, 12 October 2017 05:44

chart-canada 10 orig

The chart above shows the average detached housing prices for Vancouver*, Calgary, Edmonton, Toronto*, Ottawa* and Montréal* (the six Canadian cities with over a million people each) as well as the average of the sum of VancouverCalgary and Toronto condo (apartment) prices on the left axis. ​On the right axis is the seasonally adjusted annualized rate (SAAR) of MLS® Residential Sales across Canada (one month lag).​

​In September 2017 Toronto metro SFD prices found support after 5 months of selling below the March 2017 spike and peak price. The 2017 price gains have vanished. Vancouver prices defy gravity in all residential sectors with another HPI hat trick; FOMO and speculative pricing is still on. 

....read more HERE

also:

Brian Ripley's Plunge-o-meter which tracks the dollar and percentage losses from the peak and projects when prices might find support. HERE



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Real Estate

Gold Market Update

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Posted by Clive Maund

on Monday, 09 October 2017 06:38

The last Gold Market update almost a month ago called the intermediate top within a day, as you may recall, and the subsequent Gold and US Dollar Interim update called the rally in the dollar the day before it started. Having seen a significant reaction back by gold, the question now is “Has it run its course?” The short answer to that is yes, although calling a bottom here is complicated by the fact that gold’s COTs have not eased as much on the reaction as we might have expected, and the dollar Hedgers’ chart is still flat out bullish for the dollar. What this means is that we may need to see some bottoming action by gold, even if it soon breaks out of its rather steep short-term downtrend, and another possibility that we will examine is that the dollar and gold rally in tandem, a rare circumstance that could be occasioned by an extreme development such as an attack on North Korea, although if this happens the peoples of Seoul and Tokyo will doubtless have more important things to think about than the price of gold. 

On gold’s latest 6-month chart we can see how the reaction of recent weeks has retraced about 50% of the prior rally, as tensions with N Korea have temporarily eased. This reaction has more than fully corrected the overbought condition resulting from the rally, and has brought gold back into a zone of significant support just above its rising 200-day moving average, and with moving averages in bullish alignment, conditions generally favor a reversal and rally. The “spinning top” candlestick that occurred on Friday on increased volume may mark the turn, although the candlesticks that occurred on the charts for silver and silver proxies look like more convincing reversals. 

gold6month081017

An important factor having a bearing on the outlook for the Precious Metals was the nice reversal in copper on Thursday after a significant reaction, with it gaining nearly 3%...



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