As of April 19th the following changes will be implemented in mortgage lending:
1) All borrowers must meet the standards for a 5 year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term; - this basically will make it harder for people to qualify for a variable rate product. For instance right now debt servicing ratios use a 3 year rate typically 1.0% lower than a 5 year rate.
2) The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home; net effect of this change will be to limit owners from using their home equity to consolidate debt, do renovations, etc.
3) Non-owner occupied properties will require a minimum down payment of 20%. - this change is to reduce speculative investment in the market. Right now investors can buy a rental property with as little as 5% down. For many investors 20% might be a little "rich" and will take their money elsewhere. Time will tell if this will cause a reduction in rental inventories in the market and overall higher rents, especially in hot investment markets like Vancouver.
Now I don't mind changes to benefit the economy and some of these new rules may help. But when the motivation behind the changes seems to be the big banks trying to protect themselves from losing market share to competitors, that just doesn't sit right.
Well at least interest rates are still low!
GO CANADA GO!!
Peter McKinnon
