Out of the Bag
It is out of the bag!
The news of the Federal Finance Minister’s change to mortgage rules has flowed onto every front page.
History may look upon this pronouncement and call it Flaherty’s Folly. In the interim, many buyers will see it as more blood drained from their rosy dream of owning a Vancouver home.
Our sponsors at Invis Rob Regan-Pollack had this to say:
“In a surprising move, The Department of Finance has announced new mortgage rules in order to stabilize the continued rise in consumer debt. The new changes to mortgage rules for Regulated Lenders, will take effect July 9th. Beyond the reduction of amortization and 80% limits for refinances, the potentially most harmful change for consumers is the elimination of mortgage loan insurance for properties valued at over a Million Dollars.”
“From a market competition standpoint many mortgage banks rely on mortgage insurance to securitize and sell their mortgages. Taken literally the new changes may mean that a mortgage bank may no longer be able to securitize mortgages on purchases over a $1.0M dollars. While we support the government in its move for stability, we are concerned by changes that may limit competition and choice for consumers.”
“With the implementation of a maximum housing allowance, and reduction of amortization to 25 years, here is an example of how the changes will affect an average household buyer with a family income of $80,000/yr.”
Maximum Mortgage Amount:
- $80,000 Income
- 3.19% Annual Percentage Rate (APR)
- 5 Year Fixed Term
|Old Rules:||New Rules:|
|44% of Gross income – 30 Year Amortization||39% of Gross Income – 25 Year Amortization|
|$611,305 Mortgage||$533,923 Mortgage
*There is no doubt this 13% reduction in buying
power will cool the market.
$2633.34 Principle and Interest
$2300 Principle and Interest
Text and Table Courtesy Invis – Rob Regan-Pollock