Calgary house prices forecast to increase 2.5% this year!
Calgary house prices forecast to increase 2.5% this year: Royal LePage
Most of Canada expecting price appreciation to flatten
CALGARY — By the end of 2013, average house prices in Calgary are expected to increase 2.5 per cent, while most of Canada is expecting price appreciation to flatten, according to the Royal LePage House Price Survey and Markey Survey Forecast released Tuesday.
And while Calgary will see a nine per cent hike in sales activity this year over last year, nationally the resale housing market will experience a decline of five per cent.
Ted Zaharko, broker and owner of Royal LePage Foothills, said market activity in Calgary is completely dependent on whether sellers bring listings to market since the buyer demand is there to have strong sales in the spring.
“Market activity could increase significantly in 2013, however, the listings are not materializing,” he said. “A possible solution is that buyers who wanted to sell after 2007, when the market softened, may be holding on to their properties for better market conditions. If those units come online, it may provide some additional inventory for buyers.”
By the end of 2013, Royal LePage expects the average national home price to be 1.0 per cent higher compared to 2012.
In the fourth quarter of 2012, detached bungalows in Calgary posted the largest year-over-year price increases, rising 5.8 per cent to $440,600. Prices for standard two-storey homes rose 4.8 per cent year-over-year to $434,667, while prices for standard condominiums increased slightly by 0.6 per cent year-over-year to $250,078.
Nationally, the average price of a home increased year-over-year between 2.0 and 4.0 per cent in the fourth quarter of 2012. In the fourth quarter, standard two-storey homes rose 4.0 per cent year-over-year to $390,444, while detached bungalows increased 3.6 per cent to $356,790. National average prices for standard condominiums increased 2.0 per cent to $239,374.
“Employment created by the oilpatch continues to drive migration to Calgary and it’s difficult for this group to even find rental units let alone their dream home,” said Zaharko. “Detached bungalows performed the strongest because they are the preferred housing type for Baby Boomers who are typically looking to downsize the size of their home, but not necessarily the price.”
Compared with 2012, fewer homes are expected to trade hands in the first half of 2013 throughout Canada, which should slow the pace of home price growth.
Phil Soper, president and chief executive of Royal LePage, said the national housing market is well into a cyclical correction and that fears of a sharp or drawn out collapse are unwarranted. Home prices have risen faster than salaries and wages for three years and the market requires time to adjust, he said.
“A helpful comparison is to reflect on the beginning of 2009 when the country was in the grips of a very grim global recession,” said Soper. “It was a bleak time, with plunging consumer confidence driven by rapidly spreading unemployment. The meltdown of the American banking and finance sector had sent their housing market into a downward spiral and our own real estate market saw home sale transactions fall dramatically.
“Price appreciation in Canada ground to a halt, but home values dropped only slightly. With economic fundamentals such as employment levels improving, we expect this cyclical correction to be short-lived.”
Twitter: MTone123
© Copyright (c) The Calgary Herald
Alberta homes lead Canada for 2013
Alberta resale housing market tops Canada in annual sales growth
Forecast to lead the country again in 2013
CALGARY — Alberta will lead the country this year and in 2013 in the pace of growth in the resale housing market, according to a new forecast by the Canadian Real Estate Association.
The national association of realtors said Monday that Alberta MLS sales this year will finish up 13.1 per cent from last year to 60,800 transactions and sales will lead the country next year as well with 1.3 per cent growth to 61,600.
Nationally, sales are forecast to decline by 0.5 per cent this year to 456,300 and fall by another 2.0 per cent in 2013 to 447,400 transactions.
The average sale price in Alberta is expected to rise by 2.7 per cent this year to $363,100 and by another 2.3 per cent in 2013 to $371,300.
Across Canada, the national average sale price is forecast to increase by 0.3 per cent this year and next year to $363,900 and $365,100, respectively.
In November, Calgary MLS sales of 1,831 were up 10.6 per cent compared with last year while on the national level sales dipped by 11.9 per cent to 30,573.
The average sale price in Calgary rose by 3.8 per cent to $413,921 but fell by 0.8 per cent across the country to $356,687.
In Alberta, sales increased by 3.2 per cent to 4,034 transactions and the average price was up 4.3 per cent to $365,999.
“National sales activity has remained fairly steady at lower levels since mortgage rules were changed earlier this year, but that stability masks some real differences in trends among local housing markets,” said Wayne Moen, CREA’s president.
CREA on Monday also released its MLS Home Price Index of seven major Canadian markets. Regina’s annual price growth of 11.58 per cent led the nation followed by Calgary at 7.13 per cent.
The national aggregate price rose 3.5 per cent year-over-year, the seventh time in as many months that the year-over-year gain shrank and it marks the slowest rate of increase since May 2011.
Twitter:@MTone123
© Copyright (c) The Calgary Herald
Calgary – #1 for Real Estate Investment
Once again, Calgary has been ranked as the top real estate investment market in the country followed by Edmonton by the Real Estate Investment Network Ltd.
In its Top Alberta Investment Towns report, REIN said that Alberta’s economy has come out on top after a few years of economic turbulence.
The report identifies towns and regions poised to outperform other regions of the province over the next three to five years.
And none is better than Calgary.
“After a couple of roller-coaster years, Calgary is back on a roll. The return of jobs to the city, as well as greatly reduced office vacancy rates show us that the city’s short slump has come to an end,” said the report. “Recording a GDP growth of three per cent in 2011, and one of the lowest unemployment rates in the country, it’s no wonder Calgary is sitting as one of the top places in North America for property investors. When you combine the economic fundamentals, the population growth, and a burgeoning provincial economy, it is easy to see why so many businesses and people have come to call the city home.
“The market is hot. With the pressure on the resale housing market, there is similar pressure on the rental market. Inventory has dropped for rental accommodations while monthly rents have increased. Real estate investors and real estate agents are reporting that rental listings are being pounced on. Savvy investors purchasing units and advertising them for rent upon close are receiving calls from anxious tenants wanting to see the unit before the investor has possession and/or has done any improvements to the property. Rental sites are reporting difficulty in compiling statistics become some communities have nothing for rent.”
REIN said housing affordability will begin to be an issue in Calgary, with rents increasing and a high average sale price. But when you look at that price versus average income it shows that other cities in Canada have a much larger problem on their hands.
“Calgary has the long-term economics to support long-term market strength while other cities do not,” said REIN.
The Top Alberta Investment Towns ranked in order are: Calgary, Edmonton, Airdrie, Red Deer, St. Albert, Fort McMurray, Lethbridge, Grande Prairie, Okotoks, Leduc, Sylvan Lake and Lacombe.
The report said Airdrie has been one of the fastest growing communities in the province.
“Its proximity to the economic engine of Calgary and the growth of the surrounding economy will push the physical and economic growth limits of the city in the next decade,” said REIN.
“With increasingly easy access to many areas of Calgary via the ring road as well as the growth of job centres in and around the city, Airdrie property owners should continue to feel upward pressure on both rents as well as home prices. As affordable housing becomes a growing problem in Calgary, Airdrie will benefit from lower average house prices. As the office centre of the west, Calgary may offer employment opportunities that Airdrie does not, but much of the labour force will turn to Airdrie as a place to call home.”
REIN’s top Canadian investment cities ranked in order are: Calgary, Edmonton, Hamilton, Surrey, Maple Ridge and Pitt Meadows, Airdrie, Kitchener and Cambridge, Red Deer, St. Albert, Waterloo, Winnipeg, Saskatoon, and Halifax.
According to a research note by Scotia Economics, Alberta remains a key economic engine for Canada, with the highest provincial real GDP growth rate forecast for 2012 and 2013 at 3.4 per cent and 3.0 per cent respectively.
“The economy is growing strongly with contributions from consumer spending, business investment, particularly in the oilsands, and exports, which is encouraging given the strong Canadian dollar and soft global demand,” it said. “Provincial government spending also will continue to support growth, albeit at a slower pace than over the decade prior to the recession.”
In the second quarter of 2012, Alberta had a year-over-year population growth rate of 2.5 per cnet, the highest in the country.
“At this juncture, the federal government’s recent tightening of mortgage and home equity financing standards appears to have had a limited impact on Alberta’s housing market,” said Scotia Economics. “It continues to be supported by strong employment growth, significant wage gains and ongoing resource development.”
mtoneguzzi@calgaryherald.com
Residential Market Update – Mortgage Rates to stay low for a while.
A great summary of where we are today in relation to the economy and the housing market.
There have been a couple of highlights for the Canadian housing market in the past week:
- the U.S. Federal Reserve announcement that it is committed to low interest rates until 2015 and
- the latest global housing outlook that puts this country in better shape than most.
Anyone looking for a new mortgage or a mortgage renewal will likely be heartened by the American central bank’s interest rate pledge. The commitment to low rates makes it harder, but not impossible, for the Bank of Canada to move on its desire to increase rates.
However, that desire got a boost from Canada’s economic think-tank, the C.D. Howe Institute. It says the central bank needs to change the way it calculates inflation to take into account rising house prices. The institute says the current calculation keeps inflation lower than it really is and puts the Bank of Canada at risk of keeping rates too low for too long.
As for the global housing outlook, it shows Canadian prices continue to rise, albeit more slowly than a year ago. But around the world, countries showing price declines outnumbered gainers by more than two to one.
The iPhone’s sexy, but ‘iSave’ is far smarter
With all the hype on the new iPhone 5, this puts it a bit into perspective.
Interesting 3 minute read.
The Globe and Mail
Published Monday, Sep. 17 2012, 8:10 PM EDT
The new Apple iPhone 5 tells us a lot about why you can’t get your financial act together.
The iPhone is a brilliant device – a deluxe cellphone that has become a cultural icon. So important is the iPhone 5 that the announcement of its features and release date – it’s Sept. 21 – were treated globally as a major media event. Who doesn’t now know that the iPhone 5 is 18 per cent thinner and 20 per cent lighter than its predecessor?
A man talks on a mobile phone in front of an Apple logo outside an Apple store in downtown Shanghai in this September 3, 2012 file photo. Although Apple makes billions from new phones, a significant portion of its sales in recent years have come from dropping the price on older models once a new phone or tablet hits stores REUTERS
Apple could sell 33 million iPhone 5s globally this quarter, a tribute to the company’s gadget-building supremacy. But iPhones are also symbolic of a change in society’s attitude toward money. We now get our gratification through spending money rather than by saving it.
The savings rate in Canada has been falling for decades, more or less in line with the decline in interest rates. Today, savings accounts offer less than 1 per cent in many cases and barely 2 per cent at best. As a result, a lot of us have come to believe that saving is useless, even foolish. And so, we’ve moved on to spending.
The iPhone 5 will sell for a suggested retail price between $699 and $899 (depending on how much memory it offers), but in the past it has been possible to pay much less if you sign up for a multi-year wireless phone plan. If an iPhone sounds like an affordable luxury, ask yourself these questions:
However much the phone costs, have I contributed at least that much money, and preferably much more, to my retirement savings this year?
Have I contributed anything at all to my kids’ registered education savings plan?
Do I have any money saved that I can tap if the car’s “check engine” light comes on, if the basement floods, if the orthodontist says my kid really needs braces or if I lose my job?
If you’re covered on all of this, enjoy your new iPhone. Otherwise, you might want to reconsider that purchase because your spending and saving are out of balance.
The roughest rule of saving is that you should be putting away 10 per cent of your take-home pay for the future in a tax-free savings account or a registered retirement or education savings fund. If you’re getting a late start as a saver, your number is higher.
External factors like wage freezes and inflation can affect our ability to save, and today’s low interest rates offer no encouragement. But the biggest impediment is in our own heads. We see more value in spending than in saving.
In a way, spending by consumers is a good thing because it accounts for roughly two-thirds of our economy. But spending takes away from saving in today’s zero-sum economy, where wage growth isn’t strong enough to put us ahead of inflation. The only way to save more is to spend less.
The iPhone and similar devices make that a challenge because of the way they draw you into a web of higher spending. You could buy a cheap cellphone and your wireless phone company would probably give it to you for free if you signed up for a service plan. A basic cellphone would mean simple data needs, so you could probably get away with an inexpensive plan.
With an iPhone, you’ll pay extra to buy the phone and likely face higher monthly plan costs. And then there’s the temptation to upgrade. An iPhone 5 bought this fall could be superseded by something better within 12 months. By then, there will probably be a new iPad and, who knows, but maybe Research In Motion will have turned some heads with the new BlackBerry 10. Every new product is competition for money you could otherwise use to save or pay down debt.
You’re urged to buy things all the time via mass media, but there’s no lobby for saving. Apple had Steve Jobs on its side. Savers are stuck with Benjamin Franklin, who said that a penny saved is a penny earned.
How can we get people saving more, then? By making it automatic, not discretionary. Have money electronically diverted from your chequing account to your RRSP, TFSA, RESP or a savings account every time you get paid. Have some money left over after the bills are paid? Hello, iPhone.
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How the savings rate has tracked in the past 50 years
(data taken from first quarter from each year)
| 1962 | 6.50% |
| 1972 | 9.80% |
| 1982 | 21.20% |
| 1992 | 12.40% |
| 2002 | 4.80% |
| 2012 | 2.90% |
Source: Statistics Canada
Possible Mortgage Rate Increase from these 112.7 year lows?
We are able to watch some indicators that drive mortgage interest rates. This is how we can guess what rates are going to do over a 10 day or so period.
Right now the spread on Canadian 5 year mortgage bond is 1.795%. This is WELL BELOW the comfort zone of 1.90% and 2.10%. Can we potentially see a rise in interest rates?
Hard to say as the spread has be bouncing all over the last few days, but it could trigger a small rise in rates if it does not bounce back soon.
What does this mean?
- If you are going to buy a home, or are planning on moving up or
- have a mortgage that is up for renewal in less than 120 days from now, or know someone who does, then
- CALL for a rate hold at today’s super low rates ASAP. We answer the phone from 9 am to 10 pm every way, holidays and weekends included.
Other Key Points about Mortgage Brokers:
- We have access to all the banks.
- The banks pay us for doing their work for them so there are no fees to clients for our services.
- The rates and terms & conditions are better than the Big 6 offer.
- We offer unbiased, expert advice; we only do mortgages and nothing else; and have been 1 of the top-10 brokers in Canada for the last 5 years.
Please feel free to call or reply with comments or questions.
These are exciting times,
Mark Herman, AMP, B. Comm., CAM, MBA-Finance
1 of the Top-10 brokers of 1,700 at Mortgage Alliance
Direct: 403-681-4376
Accredited Mortgage Professional | Mortgage Alliance – Mortgages are Marvelous
Toll Free Secure E-Fax: 1-866-823-1279
E-mail: mark.herman@shaw.ca | Web: http://markherman.ca/
A study conducted by Maritz Canada showed customers renewing or renegotiating with a mortgage broker’s help reported a rate decrease of 1.40%, compared to a decrease of 1.00% among all mortgage renewals.
Brokers are your best choice for seeking home financing advice and assistance.
NO Condo Bubble in Calgary nor Toronto!
These comments below are in addition to the report last week that said that because Toronto has:
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lots of in-migration,
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New to Canada migration and
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no other kinds of homes being built in the inner city
they do need all of these new condos and it is not a bubble. Interesting.
Economists to condo investors: Smile!
Written by Vernon Clement Jones
Condo investors in Toronto have every reason to be keep smiling, with two separate bank reports suggesting their assets are almost certain to retain their value at the same time their cash flow gets buoyed by rental demand.
“As CMHC… mentioned, capital return for investors who bought new condominiums and decided to rent them once the construction was complete, could earn superior returns than on other investment products,” reads Laurentian Banks’ July economic outlook. “Furthermore, condominiums rents are generally 40% more expensive than apartments of same dimensions in the Toronto CMA, the most important spread in the whole country.”
Smiling yet?
There’s more.
RBC is also weighing in on the future of Canada’s most controversial housing market, suggesting there’s no indication condos, despite what most see as a glut of inventory, are in a bubble.
Far from it.
“Based on market activity to date,” say economists for the heftiest of Canada’s big banks, “the total number of new housing units (condos) completed by builders has not exceeded the GTA’s demographic requirements and is unlikely to do so by any significant magnitude in the next few years.”
Phew!
That dual analysis effectively counters concerns that T.O.’s high-rise properties are primed to fall in value as renters find themselves spoiled for choice and investors are forced to slash prices. The naysayers are also worried that even new construction will be subjected to a major price correction and in the short-term, a phenomenon directly tied to mortgage rule changes making it harder to win financing.
That could, in fact, still happen, although not likely on the scale many analysts had predicted earlier this year, says Laurentian in its analysis.
Snapshot of Canadians’ finances
| This is super interesting. Also remember that less than 1% of Canadians work in oil and gas, and less than 20% of Canadians make more than $85,000 a year! It shows how well Alberta is doing. |
| Jason Heath Jun 30, 2012
Who is the average Canadian — financially speaking? According to the Association for Canadian Studies, our median household income is $68,560 per year. Personal incomes are lowest in Prince Edward Island at $21,620 and highest in Alberta at $36,010. We pay $11,000 per year in income tax, donate $260 to charity, contribute $2,790 to our RRSPs and carry a credit card balance of $3,462. Mortgage and household debt comes in at a total of $112,329 Our net worth per capita has continued to rise, most recently clocking in at $193,500 per capita according to Statistics Canada. Real estate gains have continued to drive the increase to our net worth, though many have suggested the Canadian market could be in for a correction — or at least a pause. The Toronto Stock Exchange has risen 59% over the past 10 years, compared with a 3% gain for the MSCI World Index and a 4% loss for the S&P 500 (excluding dividends). Our Canadian dollar has appreciated 47% against the U.S. dollar and 16% against the euro over the past 10 years. This has made global and U.S. stock market returns even worse in Canadian dollar terms. Canada had a double-digit personal savings rate in the ’90s, but over the past two decades, this has dropped dramatically to the current 3.1% — one of the lowest savings rates of all OECD countries. The flipside of this coin is that our current personal debt to income has simultaneously reached an all-time high of 153%. So gains in real estate and stocks have been tempered by a corresponding increase in personal debt. The Economist Intelligence Unit lists Canada’s government debt per person at about US$39,883 or 81.6% of GDP. This compares with the U.S. at $37,953 or 76.3%. Go figure! That said, Greece’s public debt is currently $35,874 or 141.0% and Japan is at $87,601 or 204.9%. Canada’s federal government has been consistently posting budget surpluses of about 1% of GDP since the mid-1990s, a time when many people thought Canada was on the path to a sovereign debt crisis of its own. Quite to the contrary, Canada entered and emerged from the 2008 recession relatively unscathed. And this is the asterisk beside Canada’s 81.6% debt-to-GDP ratio when compared with the 76.3% figure for the U.S. — given our neighbours are currently spending US$1.50 for every US$1 of federal revenue. Call it a “Tale of Two Countries.” Some people suggest the U.S. and Europe could learn something from the Canadian government debt experience of the 1990s. While many people in other Western countries are now suffering as a result of their government’s debt problems, our government is sitting pretty. Our personal debt is the one black spot for the red and white as we celebrate our country’s birthday. Jason Heath is a fee-only Certified Financial Planner (CFP) and income tax professional for Objective Financial Partners Inc. in Toronto |
Has the US housing market hit bottom?
This is a copy of the blog from Boris – the president of MERIX bank – a broker bank we love and deal with often. It is worth pasting all of it here AND it is good news!
Article written by Boris Bozic on the 17 Jul 2012 in Current Events
I’m referring to the real estate market in the U.S. There have been some signs that real estate market may have reached the point where you can actually see the bottom. Interesting to note that new home construction is up in many regions of the U.S. Drive through parts of Florida and you’ll be surprised by the number of new homes being built. Another sign is the number of pending sales just recently reported. On a year over year basis, pending sales were up 14.5% in the West, 22.1% in the Midwest, 19.8% in the Northeast and 11.9% in the south. Another sign that real estate market is getting better is due to increased foreclosures.
As odd as that made sound, a real recovery of the real estate market in the U.S. will only happen when financial institutions finally deal with the backlog of foreclosures. Recent reports indicate the U.S. financial institutions are taking action against more delinquent home owners. Statistics indicated that foreclosure proceedings increased by 6% in the second quarter as compared to the precious year. That’s the first increase since 2009. How is that possible? Simple, banks chose to do nothing. If the borrower didn’t approach the bank and request a loan modification or approval of a short sale, the banks were free to act at their own pace. I suspect their motivation to deal with these issues had nothing to do with any kind of empathy for the home owner. It was more to do with flooding the market with more distressed properties which ultimately would drive the prices down even further. The shadow inventory is a subject that all stakeholders wanted to set aside and deal with it in a mushroom growing fashion. Clearly something has changed, and the banks now feel that the market can absorb the additional foreclosures. This could have further impact on home prices in the short term but many analysts are predicting the drop could be as little as 1%. Here’s another stat I found to be both encouraging and staggering. At of the end of the 2012 first quarter, approximately 11.4 million homes or 23.7% of all homes with a mortgage in the U.S. were under water, negative equity. On a quarter over quarter comparison it was 12.1 million homes or 25.2%.
There’s no doubt that U.S. real estate market has a long way to go before anyone would suggest that it’s a “normal” market. Until they (the politicians, Federal Reserve, regulators etc.,) deal with the real estate issue there will be no full economic recovery. Put aside the markets and consumer spending because the real estate market is the 800 pound gorilla. The real unemployment rate in the U.S is just over 14%, the 8.2% reported unemployment rate is manipulated data and reported by Obama sycophants, and will not come down until there’s marked improvement in the real estate market. As soon as that has happened, the better it is for us. We love it when Americans are working because they love to spend, and we have stuff we would love to sell them. Recently, given the value of the Canadian dollar, we been purchasing more in the U.S., like their homes. If you’re thinking of buying a second home in the U.S., this might be the bottom.
Until next time,
Cheers.
NEW MORTGAGE RULES
Here is the news release from the Canadian Association of Accredited Mortgage Professionals (CAAMP):
The Federal Finance Minister announced further changes to Canada’s mortgage insurance rules. Four measures were announced:
1. Amortizations reduced to 25 years
2. Refinancing limited to 80%
3. Properties purchased at over $1 million no longer eligible for mortgage insurance
4. GDS and TDS set at 39% and 44%
5. Line of Credits – LOCs – will soon be limited to 65% of the home value or LTV (Loan to Value.)
How the changes will be applied…
So we have until July 9th to get as many applicants under contract in order to access the current mortgage insurance rules. Possession on these contracts must be completed prior to Dec. 31, 2012.
Applicants going under contract on a home purchase drawn up after July 9th will have to qualify for a mortgage under the new guidelines. We will update all pre-approvals on July 9th under the new insured mortgage guidelines.
Q1. What is required to qualify for an exception to the new parameters?
A. The new measures will apply as of July 9, 2012. Exceptions will be made to satisfy a binding purchase and sale, financing or refinancing agreement where a mortgage insurance application has been made before July 9, 2012. While the changes come into force on July 9, 2012, any mortgage insurance applications received after June 21, 2012 and before July 9, 2012 that do not conform to the measures announced today must be funded by December 31, 2012.
These guidelines have existed for some time but are now more solidified. Lenders typically require that borrowers have a credit score of greater than 680 to qualify for these elevated GDS and TDS levels. Now that we are limited to a 25 year amortization knowing exactly what the upper limits on GDS and TDS are going to be critical.
Q2. Why is the Government limiting the maximum gross debt service (GDS) and total debt service (TDS) ratios?
A. The GDS ratio is the share of the borrower’s gross household income that is needed to pay for home-related expenses, such as mortgage payments, property taxes and heating expenses. The TDS ratio is the share of the borrower’s gross income that is needed to pay for home-related expenses and all other debt obligations, such as credit cards and car loans.
The new measure announced today will set the maximum GDS ratio at 39 per cent and reduce the maximum TDS ratio to 44 per cent. These debt service ratios measure the share of a household’s income that is required to cover payments associated with servicing debt. Both measures are already used by lenders and mortgage insurers to assess a borrower’s ability to pay. Setting a GDS limit and reducing the TDS limit will help prevent Canadian households from getting overextended and reduce the number of households vulnerable to economic shocks or an increase in interest rates.
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More Technical Nerdy Data:
CAAMP believes that Canadians understand the importance of paying down their mortgages. These changes, together with new OSFI underwriting guidelines – also to be announced today – may precipitate the housing market downturn the government so desperately wants to avoid. The changes take effect July 9, 2012.
CAAMP was pleased that it was again successful in ensuring the 5% down payment rule remains intact; however, the government may have overreached with this latest round of changes.
To review this morning’s Globe and Mail article click here
To review the government press release and backgrounders click here
To contact Minister Flaherty or your local MP click here
-Important to note that these rules apply in high-ratio insured mortgage – not conventional mortgages. We will likely see changes to conventional lending over time. Many lenders will opt to apply the same rules to all mortgages but there will be exceptions. Many lender is Canada now only offer insured mortgage regardless of the down payment so these rules are going to impact the majority of applications.
-We have seen changes every year for the last four years and in all cases existing mortgages already approved under the old rules were exempt from the rule changes. I would expect the same response this time with existing approved files not being affected by the current changes. I will let you know as soon as I have some understanding of how pre-approvals will be affected.
-In his new release this morning Jim Flaherty specifically mentions the Toronto/Vancouver condo market so rather than restricting condo development in those two cities they have opted to impact the entire country. They also mention the concern over Canadian household debt which had already consistently been dropping.
-OSFI the mortgage regulator is also expect to make mortgage related changes today. 65% maximum finance for lines of credit and amortization restrictions relative to age have been discussed as additional possibly changes. There is going to be a lot of confusion relative to news releases so check in with me if you have questions on specific client situations.
1. Item one is pretty severe. Fewer buyers will qualify to get into the market, those that do qualify took a haircut on what they can afford.
2. Reduced from 85%. Somewhat immaterial because the reduction from 90-85% limited the refinance market significantly already. Now even more Canadians will not be able to move high interest debt into extremely low interest mortgage debt.
3. We don’t see a lot of insured mortgage files in this price range. This rule appears to be focused directly on Toronto and Vancouver.
4. This one needs some clarification. These higher GDS and TDS ratios have always been around but limited to very high credit score applicants. I will try to get some clarification on the specifics of this changes. I believe that this item is just solidifying rules that have been very subjective historically.