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New Changes to Lending in Canada
Good day – although the latest newsletter went out a short time ago, I felt it necessary to share the latest news on the lending front in Canada...
Some of you may be aware of the changes that came down the newswire last week with regards to the Federal Government insured mortgages, and their mandate on "who" get's "what" when it comes to high ratio mortgage lending. Let's cut to the chase:
1.) 100% Financing...gone.
2.) 40 year Amortization periods...gone.
As of October 15th 2008, the zero down payment program and the 40 year amortization will be all but washed away. What the broker community is quickly learning is that many lenders have decided not to wait until the deadline...they are jumping on board right away with the forthcoming changes. Some of these lenders include Firstline, ING, and BMO.
It's interesting to sit in my position. On one hand we have economists indicating that the US and Canada operate under two very separate economies. True to a point. Just on the lending side alone, Canada has always been much more conservative when it comes to lending money. The US is coming off a clinic of 'how NOT to lend money'. On the other hand, we have not only the Federal Government, but the media - filling the general public with sentiments laced with 'fear'. Headlines that would perhaps have you believe that we are on the doorstep of re-enacting what our southern neighbors just went through just by asking the question of "is it possible?" I somehow don't think so…not with the mandate we keep with our lending practices.
One thing I WILL reinforce however is that if you were ever considering a zero down mortgage (with or without a 40 year amortization)...NOW is the time to think about taking action. Interest rates are expected to climb during the course of the year due to inflation (rising costs in energy and food); so perhaps keep this in your back pocket…but don't sit too long.
Although some lenders decided not to wait to jump on the band wagon of zapping 40 year amortizations and zero down mortgages, some lenders like Merix Financial have openly decided to keep running business as usual, and will keep it this way as long as possible!
I should mention that although some things were taken away due to new lending practices, CMHC has added other guidelines like upping the Total Debt Service ratio (TDSR) when it comes to qualifying for a mortgage. The maximum TDSR now is 45%. I realize that this seems like a 'little change', but this little change will open the market for many a homebuyer.
What does all this mean?
Canada got caught up in the US frenzy a few years back by creating new mortgage programs like 100% financing and extended amortizations. In hindsight, it looked like Canada was lagging in keeping up with the offerings of the US lending practices. NOW, the US is struggling to keep up with the Canada…or, maybe we could assume that they are embracing our conservativeness and appreciate the fact that Canada has kept their lending inhibitions in check. For us, what it boils down to is this; we have digressed back to our lending guidelines that were seen just about 7 years ago.
Devastating? Not a bit!
Sincerely,
DAN
MASS, AMP Broker/Agent
Canada First Mortgage
direct:
403.294.0033 cell: 403.710.1505
fax: 866.902.4910
email:
dan@canadafirstmortgage.com
website:
www.canadafirstmortgage.com
193 McKenzie Towne Gate SE
Calgary, Alberta, Canada
T2Z 4G2
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