Major Changes in Mortgage Qualifying

[MillerTime GFG]

Some pretty powerfully worded articles here:

http://www.canadianmortgagetrends.co...he-coffin.html

So what happens now? Here are our top 10 predictions:

1. Housing prices will tumble as a sizable minority of first-time buyers and those with higher GDS/TDS ratios no longer qualify for the mortgage amount they want.
   • Forcing all insured borrowers to prove they can afford a payment at the posted rate (4.64%) will remove up to 15-20% of buyers from the market, say lenders.
   • “This will impact more than 50% of borrowers’ [mortgage] limits, among those who select 5-year fixed rates,” said Mortgage Planner Calum Ross. “As unpopular as this may be to say, however, I fundamentally believe this is the right move by regulators. The fact they allowed such a large disparity on the qualifying rate for such a long time was, in my opinion, not a prudent lending decision.”
   • Others argue that 5-year fixed borrowers with 10%+ down payments could have refinanced and re-amortized after five years anyhow (to reduce their payments and mitigate a 200+ bps rate increase). Mind you, a 200+ bps hike in the next five years would probably cause a recession, so it’s unlikely at best.)
     .
2. Non-deposit-taking lenders could be forced to sell a wide array of loans to balance sheet lenders at a premium. They’ll be forced to pass those funding cost hikes directly through to consumers. These include refinances, amortizations over 25 years, non-owner-occupied properties and mortgages over $1 million—all the stuff that can no longer be insured and securitized.
   .
3. Broker market share will fall.
   • It’s Christmas in October for the banks. Among other things, they’ll gain refinance, jumbo mortgage and rental business from the monolines.
   • That business boost will reduce their reliance on the broker market. In fact, don’t be surprised if a Big 6 bank exits the broker channel by this time next year.

...

http://www.mortgagebrokernews.ca/new...ge-214802.aspx

Second article reflects what my initial thoughts were - that this could cripple monoline lenders, which would reduce competition in the industry. That's never a good thing.

[Leondros]

Originally Posted by Shazam

Like what?

The CRA just allocated loads of money to look exactly at real estate and associated tax evasion. It is an area that has been extremely abused over the past half decade.

One example would be they could complete a number of audits including starting from land transfer titles for a certain year and tracing them back to tax returns. For example, I found that Joe transferred his house to person X. I would expect to see either a disclosure for capital gains exemption, or a capital gain associated with an income property.

[Alpine Fisher]

This is going to be terrible for house prices in Calgary and Edmonton.
Unfortunate for those that are planning on selling.
Hopefully this curtails some of the insanity occurring in Vancouver and Toronto.
Calgary and Edmonton has a sound housing market built on fundamentals. Wish the rules only applied to certain CMA's

[d00little]

I read that if you rent a room or basement suite in your primary residence, the house is no longer 100% exempt from capital gains, only a portion.

[Fire]

Originally Posted by Alpine Fisher

This is going to be terrible for house prices in Calgary and Edmonton.
Unfortunate for those that are planning on selling.
Hopefully this curtails some of the insanity occurring in Vancouver and Toronto.
Calgary and Edmonton has a sound housing market built on fundamentals. Wish the rules only applied to certain CMA's

The whole country needs a correction in house prices, including Calgary and Edmonton. House prices have drastically outpaced income the past decade. People spending a high percentage of income on mortgages is not a good for the overall economy. Better some moderate pain now than a crash later on.

[Kavvy]

Originally Posted by Alpine Fisher

This is going to be terrible for house prices in Calgary and Edmonton.
Unfortunate for those that are planning on selling.
Hopefully this curtails some of the insanity occurring in Vancouver and Toronto.
Calgary and Edmonton has a sound housing market built on fundamentals. Wish the rules only applied to certain CMA's

I don't want to turn this into the Real Estate thread, but ... I am wondering what these fundamentals are that make you feel Calgary is sound - PM me to prevent derail?

[afc wimbledon]

I'm glad I've got another ten years or so of work in me as the Vancouver market is so going to implode!!!

[burn_this_city]

Calgary and Edmonton have already corrected by a fair degree. It's been almost a decade since any real price escalation here. I think the effect will depend on the segment of the market. Lower priced stuff shouldn't be that badly impacted, its the mid to higher end where people's reach has been greatly reduced.

[Kavvy]

Originally Posted by burn_this_city

Calgary and Edmonton have already corrected by a fair degree. It's been almost a decade since any real price escalation here. I think the effect will depend on the segment of the market. Lower priced stuff shouldn't be that badly impacted, its the mid to higher end where people's reach has been greatly reduced.

The bolded is 100% false. Look at any indicator (median price, average price, benchmark price, Teranet price) from 2012 to early 2015 and you will see real gains in the Calgary Market.

[burn_this_city]

Originally Posted by Kavvy

The bolded is 100% false. Look at any indicator (median price, average price, benchmark price, Teranet price) from 2012 to early 2015 and you will see real gains in the Calgary Market.

I don't really see it now that its been another year and the market is down at least 5-15% depending on the segment.

[burn_this_city]

Here's all I could find to flimsily assert my position. I would assume 2014 is the peak now and we're down solidly from that level.

[Kavvy]

Originally Posted by burn_this_city

I don't really see it now that its been another year and the market is down at least 5-15% depending on the segment.

I would love to see any sort of price change per segment stats- do you have them by chance to support the 5-15% and which segments they apply to?

[Kavvy]

Originally Posted by burn_this_city

Here's all I could find to flimsily assert my position. I would assume 2014 is the peak now and we're down solidly from that level.

doesn't this show a gain in prices up to 2014?

[burn_this_city]

Originally Posted by Kavvy

doesn't this show a gain in prices up to 2014?

Yes but when I said it's been a decade I mean on the balance from 2007 to today. If the average price is down close to 2007 now, wouldn't it mean basically no escalation for a decade.

[burn_this_city]

There's a lot of conflicting information out there right now. I see stats showing the price is up in 2016, but I don't believe that based on articles showing a 3.5% drop from April 2015-2016, and my own personal experience trying to buy a home and seeing the majority sold 5-10% under original list.

[burn_this_city]

Looks like you're right Kaavy, we still haven't got back down to 2007 levels.

[Kavvy]

Originally Posted by burn_this_city

Looks like you're right Kaavy, we still haven't got back down to 2007 levels.

I have an advantage - I have seen countless homes with my poor Realtor and with them come price history's! I also hate MLS benchmark - based on my data, I think it is a very delayed Moving Average. I am sure it is more complicated then that, but still.

[blankall]

Originally Posted by burn_this_city

Looks like you're right Kaavy, we still haven't got back down to 2007 levels.

Looks like prices doubled between 2005 and 2014 then leveled off. That's not normal, particularly as there was a minor correction around 2009.

[Slava]

Originally Posted by blankall

Looks like prices doubled between 2005 and 2014 then leveled off. That's not normal, particularly as there was a minor correction around 2009.

Which part isn't normal though? The doubling here is all in the first year or two of the chart, and from then on its basically flat.

[Sylvanfan]

Back when the crazy growth was occurring...I remember someone mentioning that Real Estate over a 25 year period tends to appreciate by like 7% a year on average over that type of time frame. But the bulk of that appreciation occurs in short time periods where the market explodes. If you miss those explosion time frames, you're lucky to match inflation with price appreciation in real estate.