Mortgage Update

“Hello

As was widely expected, the Bank of Canada today did not increase rates and did point to the B20 stress-me-out test as one factor in its decision-making.  What I am worried about while our local housing market (mostly) rebounds (depends who you ask and what you’re buying and selling and where), is if our rebound is too strong, then more mortgage rule changes are on the horizon.

Say it ain’t so!

The Federal Government is always tinkering with our housing policy and rules as to how they pertain to mortgage lending. We have seen two major stress-test changes happen in 2016 and 2017, and while they are slowly playing themselves out, if our market does the expected and we start seeing a recurrence of what we’ve seen the last two years (especially last year in the Spring), then the Government MAY change the following (and these are just my own predictions from my own observation of the market. HOPEFULLY none of the come to fruition)

1. HELOCs – this is the lowest-hanging fruit. Right now HELOC lending is limited to only 65% of the value of a property. Anything higher must be a mortgage. I could see HELOC lending further limited to 50% especially in light of John Pasalis’ report that the majority of investors are repeat buyers using HELOCs. Does the Bank of Canada and Government of Canada care what one Realtor says? Clearly so, if he’s getting attention by the BoC in their most recent press releases.

2. Limiting amortization back to 25 years. Even though the stress-test kicked in for the majority of lenders (credit unions excluded, but the rates there are higher, so, meh), I can see the Government clamping down on amortization to 25 years across the board. One lender offers 35-years (B2B Bank) but their rates are absurd. Most lenders offer 30-year. But, limiting to 25-years across the board would further reduce borrowing capacity which is the intended effect for our Government (EVERYONE should be able to buy a house, right?*)

3. Provincially, it’s almost inevitable that the Credit Unions will be forced to act nice and play under B20 rules or they could lose their CMHC securitization. That’s just a fancy way of saying lose access to CMHC and that would not be nice. The big caveat to this is – our provincial election. Doug Ford has been on record that he believes in a “free-er” market. Great – then let’s keep the credit unions out of this (he might talk a big game but they might follow suit anyways since CMHC is a federal crown corporation and not provincially regulated)

While I hope none of these changes occur I am cognizant that this current Government regime wants to limit the potential losses to the housing market, and by way, limit access so debt isn’t as easy to get while rates may go up.

As always these are just my opinions and I’m always keeping an eye out on what’s going on out there. Let’s see if I’m right or wrong moving forward!!

Thanks for reading!”

Jake Abramowicz