Jim Flaherty and mortgage rates

[Deegee]

Originally Posted by Jacks

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


$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.


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.

Show me the 3000 sqft homes with a triple garage and pool for $300,000 in Calgary. Provide links.

Hell, even in Olds where I live $300,000 gets you an older starter home, or a new build with a lot so small it barely fits a swing set.

And the mortgage comment is part hyperbole, but part truth. For example, a year ago most prime car loans we saw through our dealer plan program capped out at 7 year amortizations. Now several of them are written at 8 years because of competition. Same thing would happen with Mortgages if it wasn't for legislation. As soon as one company does something stupid (such as lending 100% LTV on a house), other companies would jump on board for fear of losing out on business.

Do you think if rules changed, federal regulated lending institutions would continue lending 65% on HELOCs or do you think they'd want to compete with Credit Unions still offering 80% LTV? I guess they would go back to 80% and charge Credit Card rates, right?

[Red]

Originally Posted by Slava

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

If that's the case then I am ok with it, but I don't see anywhere that these rates were for conventional mortgages only. Manulife deals with non-conventional mortgages as a whole, just like any bank so I am assuming the rates were for all.

[MarchHare]

$60,000-$100,000 for a down payment?
We are talking about a starter home right?

Basic starter homes in Calgary sell for around $300-350k, which means you'd need $60,000-70,000 for a 20% downpayment.

[Street Pharmacist]

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?

If one can only buy their first home with a 20% downpayment, you eliminate the vast majority of new buyers. Guess what then happens to house prices with no new entrants?

That was a fine soapbox to stand on ten years ago, but with the average house price in your market being as high as it is, $60000 is not a sum most can come up with. Kind of a ridiculous expectation

[vanisleflamesfan]

So big Jim, the Finance Minister who has added $150 BILLION of new debt to Canada will now lecture you on the dangers of taking on too much debt.

Oh Jimmy... I'm all ears!

[Regorium]

Originally Posted by Street Pharmacist

If one can only buy their first home with a 20% downpayment, you eliminate the vast majority of new buyers. Guess what then happens to house prices with no new entrants?

That was a fine soapbox to stand on ten years ago, but with the average house price in your market being as high as it is, $60000 is not a sum most can come up with. Kind of a ridiculous expectation

The point is that maybe if you can't come up with $60,000, you should just rent? If everyone was prudent like this, then prices might actually come down for once.

[Street Pharmacist]

Originally Posted by Regorium

The point is that maybe if you can't come up with $60,000, you should just rent? If everyone was prudent like this, then prices might actually come down for once.

But why should they rent?

[jammies]

Originally Posted by Street Pharmacist

Guess what then happens to house prices with no new entrants?

The prices come down as supply outpaces demand? Making houses more affordable for the fiscally prudent, and reducing the reliance on credit which fuels our economy?

Then the whole economy crashes, there is fire and looting on the streets, fascists rise to power, we invade the USA with the support of fifth-columnists expecting Armageddon and the Rapture, someone captures a nuke and shoots it off, there's a thermonuclear war, and all human life on this planet is eradicated.

That's what we get for running the economy on cheap credit - you can't get off the addiction, no matter how bad it is for you, because the alternative is worse.

[jammies]

Originally Posted by Street Pharmacist

But why should they rent?

Because they don't have enough money to buy?

[MarchHare]

Originally Posted by Regorium

The point is that maybe if you can't come up with $60,000, you should just rent? If everyone was prudent like this, then prices might actually come down for once.

It would have taken my wife and I about five years to save $60,000, and that's if we were really pinching pennies. If we had been renting for those years, we'd have just been throwing money away each month instead of building equity in our home. We also wouldn't have had any money left over to invest in our retirement savings during those years if any spare cash we had was being set aside for a home downpayment.

Maybe if you belong to the CalgaryPuck $100k+ Salary Club coming up with $60k for a downpayment isn't difficult. For most young couples, though, saving that kind of money isn't feasible and would delay home ownership until one is in their mid-30s or older.

[MarchHare]

Originally Posted by jammies

Because they don't have enough money to buy?

According to whom?

As I posted earlier in this thread, I bought my home in 2007 when my wife and I only had enough savings for 10% down. In the ensuing 5+ years, we've never missed a mortgage payment and have even made several lump sum payments directly agains the principal. We'll be living mortgage-free by age 37.

Requiring a 20% downpayment might have been feasible for young couples when prices for starter homes were in the low-mid $100s, but it doesn't work when a basic 2BR home in Calgary sells for $300-350k.

[Red]

Originally Posted by Street Pharmacist

But why should they rent?

Because they can't afford a house?

That used to be the case for most youngins - back in the day of sanity when people needed a downpayment and job history to qualify for a small mortgage.

[Jacks]

Originally Posted by Deegee

Show me the 3000 sqft homes with a triple garage and pool for $300,000 in Calgary. Provide links.

Your post was talking about 5% down, I was talking about the more standard 10% down. I didn't see that you were replying to cowboy's post talking about 20% down, my bad. At 10% down you can get into a starter home for $30-$40K, with RRSP HBP that should be quite manageable.

[Red]

Originally Posted by MarchHare

It would have taken my wife and I about five years to save $60,000, and that's if we were really pinching pennies. If we had been renting for those years, we'd have just been throwing money away each month instead of building equity in our home. We also wouldn't have had any money left over to invest in our retirement savings during those years if any spare cash we had was being set aside for a home downpayment.

Maybe if you belong to the CalgaryPuck $100k+ Salary Club coming up with $60k for a downpayment isn't difficult. For most young couples, though, saving that kind of money isn't feasible and would delay home ownership until one is in their mid-30s or older.

Rome wasn't built in a day. 5 years to save for downpayment is not that bad. You'd end up with half the mortgage you have now. Houses would have been much cheaper.
Un-qualified kids being able to borrow 300K is the reason why a shoebox costs 300K.

[MarchHare]

Because they can't afford a house?

Why not?

With the Calgary rental market in its current state, you don't save much by renting instead of taking out a mortgage and buying.

That used to be the case for most youngins - back in the day of sanity when people needed a downpayment and job history to qualify for a small mortgage.

"Back in the day of sanity" housing prices weren't rising significantly faster than the rate of inflation. It's now all but impossible for "most youngins" to save 20% down.

[Cowboy89]

Originally Posted by Regorium

The point is that maybe if you can't come up with $60,000, you should just rent? If everyone was prudent like this, then prices might actually come down for once.

That's actually the point, housing is only unaffordable for first time buyers to buy with a good downpayment because we have a government insurance corporation essentially subsidize buyers to bid up house prices with other peoples money. This system forces many middle class people to essentially use their house as their only means of wealth and retirement fund because many cannot both save for retirement and buy a house.

[Red]

Originally Posted by MarchHare

According to whom?

As I posted earlier in this thread, I bought my home in 2007 when my wife and I only had enough savings for 10% down. In the ensuing 5+ years, we've never missed a mortgage payment and have even made several lump sum payments directly agains the principal. We'll be living mortgage-free by age 37.

Requiring a 20% downpayment might have been feasible for young couples when prices for starter homes were in the low-mid $100s, but it doesn't work when a basic 2BR home in Calgary sells for $300-350k.

1. And there are many others that are living paycheck to paycheck.
2. Without cheap credit houses would be half the price they are now. I don't understand why people miss that.

[jammies]

Originally Posted by MarchHare

According to whom?

Well, according to the reality of how it would be if you had to save 20% down payment to qualify for a mortgage.

There's trade-offs for both paths - we've gone the path of easy credit for more than two decades, and while there are more home-owners than ever before, there are also higher levels of personal debt than ever before.

While we didn't take nearly the hit that the USA did five years ago, there are consequences to housing bubbles and overextended credit that can be much worse for someone personally than having to rent instead of buy for 5-10 years. That the current way things work is great for you, doesn't mean it's great for everyone or for society as a whole.

[MarchHare]

Originally Posted by Red

Rome wasn't built in a day. 5 years to save for downpayment is not that bad. You'd end up with half the mortgage you have now. Houses would have been much cheaper.
Un-qualified kids being able to borrow 300K is the reason why a shoebox costs 300K.

We did save for nearly five years (to get even 10% down, we both had to liquidate our RRSPs using the Home Buyers' Plan). If we needed 20% down, it would have been another five years of saving on top of that (10 years total). Instead, we bought our home with 10% down and have been building equity in it ever since instead of throwing away money every month by renting.

[Red]

Originally Posted by MarchHare

Why not?

With the Calgary rental market in its current state, you don't save much by renting instead of taking out a mortgage and buying.



"Back in the day of sanity" housing prices weren't rising significantly faster than the rate of inflation. It's now all but impossible for "most youngins" to save 20% down.

Cheap credit made this insane increase possible. RE typically keeps up with inflation. What you have seen in the last 10 years is not the norm. Youngins need to realize that and be patient instead of being stupid and jumping in to huge mortgages for shoeboxes. It is not a requirement to own a house before you are 30 years old. Gen Y is so entitled sometimes......