Jim Flaherty and mortgage rates

[Matty81]

Anybody else up for renewal this spring POed about the finance minister personally phoning the banks and telling them not to lower rates? Stay the eff out of it.

The National Post in particular is all over him today... while I respect the concern for Canadian debt load I think it's not his role to be directly trying to influence market prices, and even if he did want to influence it, calling them personally on an ad hoc basis is bush.

It will probably only be a few extra bucks out of my pocket, but still I'd like to see him keep his big trapper shut on the issue. Probably lots of guys who have small or no mortgages don't have the same perspective.

NP comments :
http://fullcomment.nationalpost.com/...too-much-debt/

http://fullcomment.nationalpost.com/...ance-minister/

[TurnedTheCorner]

http://forum.calgarypuck.com/showthread.php?t=90831

[Brannigans Law]

It's effing outrageous. I plan on buying a house and mortgage shopping very soon and the fact this ass clown is wanting to prevent me from getting a great rate like that is insane. This isn't some fly by night credit card company offering people 0% credit cards for 10k to go insane; these are mortgages. The last 3 years of my life have been geared to this financial decision. What a joke.

[Slava]

If you haggle and such you can still get these rates. Say, hypothetically, you had an advisor in your contacts who was through Manulife. They could probably make a call and get you the rate that was otherwise no longer advertised.

[chemgear]

Originally Posted by Slava

If you haggle and such you can still get these rates. Say, hypothetically, you had an advisor in your contacts who was through Manulife. They could probably make a call and get you the rate that was otherwise no longer advertised.

Take the hint and hit him up!

(Really, nothing has changed - you could get those rates before and now.)

[Red]

The government (taxpayers) insure these mortgages so I think he has the right to interfere.
My take is that if you are against government interference then I hope you didn't take the CHMC insurance.

And they wouldn't be able to offer you these low interest rates if the government didn't guarantee them so again, it's a two way highway.

[GP_Matt]

Originally Posted by Slava

If you haggle and such you can still get these rates. Say, hypothetically, you had an advisor in your contacts who was through Manulife. They could probably make a call and get you the rate that was otherwise no longer advertised.

What sort of rate is available on the M1 account?

[Slava]

Originally Posted by Red

The government (taxpayers) insure these mortgages so I think he has the right to interfere.
My take is that if you are against government interference then I hope you didn't take the CHMC insurance.

And they wouldn't be able to offer you these low interest rates if the government didn't guarantee them so again, it's a two way highway.

No, the CMHC doesn't insure these mortgages actually. These are 80% LTV and below.

[Slava]

Originally Posted by GP_Matt

What sort of rate is available on the M1 account?

Its still at %3.5.

[SebC]

Originally Posted by Red

The government (taxpayers) insure these mortgages so I think he has the right to interfere.
My take is that if you are against government interference then I hope you didn't take the CHMC insurance.

And they wouldn't be able to offer you these low interest rates if the government didn't guarantee them so again, it's a two way highway.

I don't think you'd find too many smart and knowledgeable people who would say that he shouldn't do anything, only that the thing he is doing is wrong one.

Mr. Flaherty’s concerns appear to be that consumers are piling on too much debt and the CMHC is at risk if there are a wave of defaults. If these are the concerns, then why not simply revise lending standards and CMHC insurance rates?

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/is-flahertys-mortgage-move-setting-a-bad-policy-precedent/article9981653

[Deegee]

When CMHC qualifies based on benchmark rate if the term is under 5 years (or floating), why is anyone surprised that the price war is heated particularly in the 5 year fixed area?

Seriously.

[Matty81]

Originally Posted by Red

The government (taxpayers) insure these mortgages so I think he has the right to interfere.
My take is that if you are against government interference then I hope you didn't take the CHMC insurance.

And they wouldn't be able to offer you these low interest rates if the government didn't guarantee them so again, it's a two way highway.

You know what, I don't agree that he has any right to try to set prices to begin with, the government being involved in an industry in any way doesn't by extension give them the right to set prices (we pay healthcare costs for gunshot victims but politicians don't call sporting good chains when 12 gauge prices dip), but that's not the main point to me.

If the government wants to influence mortgage rates, they do it like any large organization should, professionally and systematically, and sit down with the banks as a group and make the message clear, not call the banks who are lowering rates one by one, personally.

And I have to say that it all just seems hypocritical to me when the particular political party making said calls has sold itself as pro small government, and rah rah free market, plus the Bank of Canada itself hasn't raised rates in a ridiculous length of time.

Also - re: said mortgage rate, cheers to the advisor extending offer for help.

[Deegee]

Slava, out of curiosity, how does one qualify for the M1 account? Do they need to qualify on the interest only payments and I'm guessing M1 doesn't do 80% LTV in depressed markets (very small town east central Alberta for example)?

EDIT: I should add you can PM me if you prefer and it's not really a solicitation for business, rather I am curious.

[Slava]

Originally Posted by Deegee

Slava, out of curiosity, how does one qualify for the M1 account? Do they need to qualify on the interest only payments and I'm guessing M1 doesn't do 80% LTV in depressed markets (very small town east central Alberta for example)?

You have to qualify based on the five year fixed rates actually, and you can no longer do more than 65% loan to value with a HELOC. So today what you get is a 65% HELOC and 15% fixed term. There are some places where you can't get the M1, but I would have to check to be honest...I'm not 100% sure on where.

[Cowboy89]

Originally Posted by Red

The government (taxpayers) insure these mortgages so I think he has the right to interfere.
My take is that if you are against government interference then I hope you didn't take the CHMC insurance.

And they wouldn't be able to offer you these low interest rates if the government didn't guarantee them so again, it's a two way highway.

This might offend some, but with regards to people who buy with less than 20% down and need CMHC insurance:

If a bank wouldn't carry your mortgage on their books without default insurance because it's too risky for their loan portfolio uninsured, what makes you think it's a smart financial decision to buy a house with so little downpayment?

[Cowboy89]

Originally Posted by SebC

I don't think you'd find too many smart and knowledgeable people who would say that he shouldn't do anything, only that the thing he is doing is wrong one.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/is-flahertys-mortgage-move-setting-a-bad-policy-precedent/article9981653

I agree with this. Just kneecap the CMHC and slow down the insuring of high ratio loans. The olden days didn't have housing bubbles because we didn't enable people without any money or the discipline to save a real down payment buy homes.

[MarchHare]

Originally Posted by Cowboy89

This might offend some, but with regards to people who buy with less than 20% down and need CMHC insurance:

If a bank wouldn't carry your mortgage on their books without default insurance because it's too risky for their loan portfolio uninsured, what makes you think it's a smart financial decision to buy a house with so little downpayment?

My wife and I bought our first home in 2007, a modest 2BR condo in the Beltline. We scraped together every bit of money we had available at the time, including liquidating our RRSPs using the Home Buyers' Plan. Even after doing that, we could only manage about 10% down. Five and a half years later, we haven't missed a single mortgage payment and have even made several lump sum deposits to pay off that debt faster. When our term was up for renewal last year, our bank offered us a very competitive rate (5-year fixed at 2.9%). We'll be mortgage-free by 2017.

So yes, I think it was a smart financial decision for us to buy our home with so little downpayment.

[Deegee]

We only bought with 5% down and I understand why many do. I feel comfortable with the decision because we're no longer paying rent.

Unless parents are helping out it can be challenging saving $60,000-$100,000 cash for a down payment when you have children and a rent payment that is north of $1,000.00. Not everyone out there is the 1% like on CP.

Frankly, banks carry a mortgage with default insurance over 80% because they are not allowed to carry it as a conventional mortgage over 80% due to regulations. You better believe that all places would finance 100% if they could get away with it because competition between FIs and brokers would push to that.

[Jacks]

Originally Posted by MarchHare

My wife and I bought our first home in 2007, a modest 2BR condo in the Beltline. We scraped together every bit of money we had available at the time, including liquidating our RRSPs using the Home Buyers' Plan. Even after doing that, we could only manage about 10% down. Five and a half years later, we haven't missed a single mortgage payment and have even made several lump sum deposits to pay off that debt faster. When our term was up for renewal last year, our bank offered us a very competitive rate (5-year fixed at 2.9%). We'll be mortgage-free by 2017.

So yes, I think it was a smart financial decision for us to buy our home with so little downpayment.

Sounds like you are a fiscally responsible person, not everyone is like that.

Originally Posted by Deegee

Unless parents are helping out it can be challenging saving $60,000-$100,000 cash for a down payment

$60,000-$100,000 for a down payment?
We are talking about a starter home right?
Your first house doesn't need to be 3000sqft with a triple garage and a pool.

Originally Posted by Deegee

You better believe that all places would finance 100% if they could get away with it because competition between FIs and brokers would push to that.

Ya, I don't think so. As it is now they have little to no risk with CMHC guaranteeing mortgages. Banks would not lend with 100% risk unless they were getting a good return. Think credit card rates.

[Rutuu]

Originally Posted by MarchHare

My wife and I bought our first home in 2007, a modest 2BR condo in the Beltline. We scraped together every bit of money we had available at the time, including liquidating our RRSPs using the Home Buyers' Plan. Even after doing that, we could only manage about 10% down. Five and a half years later, we haven't missed a single mortgage payment and have even made several lump sum deposits to pay off that debt faster. When our term was up for renewal last year, our bank offered us a very competitive rate (5-year fixed at 2.9%). We'll be mortgage-free by 2017.

So yes, I think it was a smart financial decision for us to buy our home with so little downpayment.

As someone who rents and has cash sitting in my bank account (not in Canada) it's pretty insulting that a bank would offer a 2.9% mortgage rate. Basically that means I'd be an idiot for having a savings account back home.

Personally I'd rater see 7% mortgage rates and 5% in my savings account before tax, but that's probably just me.

Anyway I applaud the moves by Flaherty over the past couple years when it comes to mortgages.