Jumping on the bandwagon…
Garth Turner’s favorite whipping boy Jim Flaherty’s Finance Department recently announced some changes to the Canadian mortgage market. The following changes take affect on April 19th of this year. (My comments are in brackets after each change.)
1. Borrowers will need to qualify under a 5 year fixed rate no matter what term they choose. (Previously, most lenders used a three year term. I really like this move. It’s a prudent way to help ensure debt ratios for borrowers don’t get crazy once rates move up.)
2. 90% maximum refinancing will now be the limit, compared to the previous limit of 95%. (Not really in favor of this one. The major contributing factor to paying off something like this isn’t the loan to value ratio, it’s income. At the end of the day, not really that big of a deal.)
3. 80% maximum financing on rental property. (I understand why this move was taken. It was to try to curb the speculators out there. Am I the only one who thinks that we really don’t have a problem with speculators in Canada?)
There was speculation that the department of Finance would make much more drastic moves, including shortening amortization periods and increasing down payment requirements. I think the government is trying to slow down the market rather than use a pin to pop the bubble. Only time will tell if they’re successful or not.
All in all, they were pretty tame changes. One has to wonder if they’ll get the job done or not.