MORTGAGE STRESS TEST ADDRESSED AT THE CONFERENCE
On Monday Oct 29 2018, CMHC addressed a few questions regarding the regulatory changes in the mortgage industry at the National Mortgage Broker conference
The mediator for this seminar was the President of the “Mortgage Professionals Canada”.
The discussion was mainly about the Mortgage stress test ie; B20. CMHC seems to think that the mortgage regulation -B 20 created a “healthier housing system” as he mentioned.
Many mortgage brokers are struggling to understand this new reasoning as we have seen many of our clients mortgages being declined due to the new revised mortgage rule – stress test, B20.
In these times, when interest rates is on the rise, one must wonder how this will further impact the consumer. Are there additional changes to the mortgage rules in the future which could assist the consumer in qualifying for a mortgage?
CMHC doesn’t seem to be ready to make any changes any time soon. According to Sidall of CMHC, in a governmental environment it takes months for changes to take place and see the results, we have to be patient.
INEQUALITY ACROSS CANADA
The B-20 mortgage rule may be effective for Toronto and Vancouver & Montreal but is surely has a negative impact on the prairies.
Has the Finance Minister and Mr. Sidall visited Alberta after the forest fire in Fort McMurray 4 years ago which destroyed over 24000 homes? Has they visited Alberta after the downturn in the oil industry 3 years ago? Carbon Tax! All these factors have affected the economy in the prairies, and then the stress test was implemented.
And what about this inequality between the Credit Unions, private lenders and the Banks ,Trust companies? My guess would be that the Credit unions and private lenders have benefited the most from the new stress test, while other banks and finance companies have seen slower growth.
WHAT ABOUT CMHC MORTGAGE INSURANCE CAP?
The CMHC mortgage Insurance Cap is currently at 1 million dollars. Many homes in Vancouver and Toronto well exceed this price. Increasing the cap would only encourage price increase in the housing market in those regions.
However, in the prairies very few homes are worth over 1 million dollars. So for the time being we don’t anticipate CMHC making any changes in that area.
REFINANCING
During the process of implementing the mortgage rules B-20. Properties coming up for renewal were also impacted when the mortgage rules changed. The new mortgage rules prohibits the borrowers with an insured mortgage from refinancing while still showing up in CMHC’s book of business. Which makes sense CMHC does not want to encourage the consumer to use their home like a cash machine. On the other hand, it hinders entrepreneurs wanting to take out some equity out of their home to expand their business. This aspect of the rules will probably not change for a while and will stay on the back burner.
WHAT IS THE #1 MARKET RISK
According to CMHC and other researchers, they have found that “job loss” is the primary factor to mortgage delinquencies and foreclosures with First-time home buyers trailing not too far behind.
In a recent survey close to 40% of the consumer responded that they do not have financial ability or the cash flow to withstand an economic downturn. As commented by Evan Sidell, the B-20 mortgage rules is targeted mostly towards first-time home buyers, and helps the first-time home buyers reduce their risk. We do agree that the B-20 is working for the first-time home buyers. It is forcing the housing market to reduce their home price to a certain extend. It is however forcing first time-home buyers to buy a home further away from the city, or lower their expectations / standards when buying a home.
Close to 50% of First-time home buyers will be using a mortgage broker to buy their home and close to 1/3 of other home buyers will do the same.
While all of this might seem confusing, please do not hesitate to contact us for more information about mortgages or what amount you could qualify for. Please click here to apply now
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The Mortgage Centre – Sky Financial Corporation Tel: 1-800-472-9791
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