08 Nov 2012
Feds Effort to Slow Real Estate Market is Working: B-20 Recap
Last week we discussed the new B-20 Mortgage changes implemented by the Feds. Now that the B-20 has officially kicked in, here’s just a quick reminder of how these major changes now affect most major lenders and all the banks:
- Maximum loan-to-value for home equity lines of credit have been capped at 65%. – Meaning if your house is worth $500K, you have a mortgage of $350K your equity is $150K. In this case you may qualify for a Home Equity Line of Credit (HELOC) of up to 65% of the equity, or in this case: $97,500. This leaves the home owner with some equity in the home with a comfortable buffer.
- 5% cash back mortgages can no longer be used to fund the down payment for a mortgage.
- All mortgages with a term less than 5 years, and variable rate mortgages, must now qualify at the Bank of Canada rate – 5.24%. – Ouch! This one’s likely to affect the borderline 1st time buyer, could mean a greater hit to the entry level condo market.
Hopefully the government will keep their noses out of the housing market going forward as 4 sets of rule changes over the last few years really looks like a lot of government interference in a free market economy.
ON another note… the doom and gloom that has been hanging over the Canadian housing market is brightening a little. Make no mistake, the market is slowing and prices are softening – which is exactly what the federal government wants – but the dark and foreboding headlines have received a little sunshine.
Canada Mortgage and Housing Corporation’s latest quarterly report forecasts increasing housing starts, increasing resales and increasing prices over the next year. Certainly the pace of those increases is slowing, but it’s a long way from a bursting bubble! No reason for people to sit on the fence!
Further, a couple of well-known Canadian economists say there’s no need to fear a U.S.-style meltdown.
Among their key points: – While the debt-to-income ratio is at a record high (163%) the rate of increase is slowing; Canadians aren’t loading up on debt the way Americans did before the crash. As well, debt relative to assets is below peak levels in Canada. – Canadian mortgages are higher quality; borrowers have better credit scores and they have more equity in their homes. – Canadian home buyers are insulating themselves against inevitable interest rate hikes by taking out fixed rate mortgages, the opposite of what happened in the U.S.
BEST RATES: 1yr 2.65% – 3yr 2.79% – 5yr 2.99% – Variable 2.65%
Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, reach out to him if you have any questions about these changes and how they affect you. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!
