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Topic: Potential government mortgage changes
Rate Changes:
Fixed: Five year fixed rates have stabilized in the 3.29 to 3.39% range, with the ten year at 3.89% still being available as well.
Variable: The variable is now holding steady in the prime -.1 to prime +.2 range. (prime is 3.0%)
Rumours of potential government mortgage changes:
Well, the rumour is that “big brother”Jim Flaherty is causing waves again with some additional government mortgage changes being discussed.
- Removal of cash back for down payment mortgages. Currently if our clients have a strong credit score and stable employment lenders are able to, in exchange for an increased rate, offer the client’s up to 5.5% cash back for the down payment on their new home. This cash back essentially makes the purchase a zero down payment required mortgage. Based upon discussions that I have had with our lending managers and various lender senior executives, the default ratios do not support any cause for concern about the ability of these borrowers to repay their mortgage. Unfortunately reality and perception are not always the same thing, in this case the perception of “zero down payment” mortgages being risky looks like it might outweigh the reality of them having been shown to be the exact opposite.
- Reduction of the maximum lending amount for secured lines of credit. Currently we are able to obtain secured lines of credit for clients up to 80% of the value of their home. With the new potential government mortgage changes, we could see this amount reduced to 60% of your current home value. A secured line of credit used properly can be a very powerful tool for the right client, however I would say that based upon personal experience these client are maybe one in ten. I have written about the dangers of secured lines of credit previously http://www.mortgageshowdown.com/?p=628. Honestly these would not be an issue if the banks didn’t discover about seven years ago what a great money maker they are (not pointing any fingers …TD) and started recommending them to most clients regardless of their true best fit.
My personal thoughts on the potential government mortgage changes are that for the zero down, the motivation for these changes are based upon perception and have very little ground in facts. For the line of credit, it has quite a bit of grounding in fact and unfortunately the reduction could end up hurting the people that use it propertly in order to protect that people have it as a result of bad advice.
I hope you have an awesome week, please feel free to contact me with any questions about the rumours surrounding the Government of Canada mortgage changes.