CMHC Announces an Announcement **Edit: CMHC increases insurance premiums

[Bill Bumface]

Originally Posted by Calgary14

Increasing the minimum down payment required to 10% would likely be a bit drastic considering how much houses cost these days

Except it would directly make houses more affordable.

Houses sell for what people can pay. The dollar amount per month people will pay hasn't changed dramatically. They amount they can borrow has gone way up with lower interest rates, which have fuelled much higher housing prices.

If you take away the buying power of a bunch of people, you reduce the price of a good.

I hope they do it, housing is stupid in Canada.

[mustache ride]

Originally Posted by hulkrogan

Except it would directly make houses more affordable.

Houses sell for what people can pay. The dollar amount per month people will pay hasn't changed dramatically. They amount they can borrow has gone way up with lower interest rates, which have fuelled much higher housing prices.

If you take away the buying power of a bunch of people, you reduce the price of a good.

I hope they do it, housing is stupid in Canada.

Does it really work like that though. People still need somewhere to live and if they don't own then they have to rent. So if you put pressure on one side of the market the other side will react.

[GP_Matt]

If rent went up I think a lot of richer people would look to purchase a rental home to cash in on it. Thus making the rich richer and the poor poorer.
If the only thing that changes is a barrier to entry like the down payment then I suspect there are a lot of people who can take advantage of that.

[Bill Bumface]

Originally Posted by mustache ride

Does it really work like that though.

Loosely. Obviously there are many complicated factors that influence prices as well.

[topfiverecords]

Raising premiums. Effective May 1st.

http://www.theglobeandmail.com/repor...ticle17159342/

[Red]

Originally Posted by mustache ride

Does it really work like that though. People still need somewhere to live and if they don't own then they have to rent. So if you put pressure on one side of the market the other side will react.

Of course it does. Plus loosening up of lending rules.

2006 saw the introduction of 0% mortgages and 40 year amortizations. It really fueled the market.

Sept 2010 saw the introduction of emergency 1% interest rate from BOC. That has kept the party going after the US crash. We saw a bit of a fall, but BOC lowered the rates to entice new wave of buyers. Saved the market for the time being.

The 2006 rules have now been reverted back so that’s good, but until we see BOC pull back the emergency rates we will continue to see the madness. Speculation is that the rates will start rising in 2015. When they do…watch out.

http://pettycash.files.wordpress.com...use_prices.png

[bubbsy]

can anyone quantify the impacts of this increase??

[fundmark19]

Originally Posted by Red

Of course it does. Plus loosening up of lending rules.

2006 saw the introduction of 0% mortgages and 40 year amortizations. It really fueled the market.

Sept 2010 saw the introduction of emergency 1% interest rate from BOC. That has kept the party going after the US crash. We saw a bit of a fall, but BOC lowered the rates to entice new wave of buyers. Saved the market for the time being.

The 2006 rules have now been reverted back so that’s good, but until we see BOC pull back the emergency rates we will continue to see the madness. Speculation is that the rates will start rising in 2015. When they do…watch out.

http://pettycash.files.wordpress.com...use_prices.png

Every year they say that rates will start rising next year some time. It is getting hard to believe with the US still struggling that they will get going any time soon.

[Brewmaster]

Originally Posted by bubbsy

can anyone quantify the impacts of this increase??

As a first time home buyer, if I am taking out a mortgage for a home with a purchase price of $400,000 here are the changes:

5% Downpayment ($20,000)
CMHC premium increases from $10,450 to $11,970

10% Downpayment ($40,000)
CMHC premium increases from $7,200 to $8,640

15% Downpayment ($60,000)
CMHC premium increases from $5,950 to $6,120

[Red]

Originally Posted by fundmark19

Every year they say that rates will start rising next year some time. It is getting hard to believe with the US still struggling that they will get going any time soon.

Well, sure, but at the same time most mortgage holders are in it long term. And just because it hasnt happened in the last 2 years (hasnt been longer than that) doesn't mean it won't happen period. So even if this happens in 5 years, people will still be affected.

Interest rates will be much higher in 3-5 years. You can bank on it. The economy won't be in the toilet forever.

[Bill Bumface]

Originally Posted by Brewmaster

As a first time home buyer, if I am taking out a mortgage for a home with a purchase price of $400,000 here are the changes:

5% Downpayment ($20,000)
CMHC premium increases from $10,450 to $11,970

10% Downpayment ($40,000)
CMHC premium increases from $7,200 to $8,640

15% Downpayment ($60,000)
CMHC premium increases from $5,950 to $6,120

Life changing stuff.

Good thing they pre-announced this announcement!

[automaton 3]

Originally Posted by pylon

The number one rule in lending, always borrow as much as you can, if you can borrow at less of a rate than you could reasonably expect a return. In the off chance, things go all 1981 again and the bottom completely falls out, you will still have your 50-60k or whatever parked somewhere, or at least a portion there of it left if you really desperately need it.

I think your strategy is sound so long as people have the discipline to actually save.

What I see on a regular basis is people mortgaging to the maximum, then promptly buying a new Ram, RV and jetskis and renovating their kitchen using their line of credit.

[topfiverecords]

Originally Posted by Brewmaster

As a first time home buyer, if I am taking out a mortgage for a home with a purchase price of $400,000 here are the changes:

5% Downpayment ($20,000)
CMHC premium increases from $10,450 to $11,970

10% Downpayment ($40,000)
CMHC premium increases from $7,200 to $8,640

15% Downpayment ($60,000)
CMHC premium increases from $5,950 to $6,120

Your percentage increase seems to go up for the 10%. You have a 14.5% increase on the 5% downpayment, then 20% on the 10%, then a 2.8% increase on the 15%.

[Brewmaster]

Originally Posted by topfiverecords

Your percentage increase seems to go up for the 10%. You have a 14.5% increase on the 5% downpayment, then 20% on the 10%, then a 2.8% increase on the 15%.

Here's the way it breaks down from my understanding:

5% Downpayment (or Loan to Value Ratio Up to and including 95%)
CMHC premium increases from 2.75% to 3.15%

10% Downpayment (or Loan to Value Ratio Up to and including 90%)
CMHC premium increases from 2.00% to 2.40%

15% Downpayment (or Loan to Value Ratio Up to and including 85%)
CMHC premium increases from 1.75% to 1.80%

[darklord700]

Only $5 increase in premium on average. Gotta skip a latte a month to make that up, ouch.

[Drury18]

Question from the oblivious:

If I purchased a house two years ago that is insured by CMHC, will I see an increase in my premiums (and an increase in my mortgage payment) or is this for people newly insured for a mortgage?

[squiggs96]

Originally Posted by Drury18

Question from the oblivious:

If I purchased a house two years ago that is insured by CMHC, will I see an increase in my premiums (and an increase in my mortgage payment) or is this for people newly insured for a mortgage?

Second sentence from the article:

The increases will be for new policies, not those that are already insured.

[kevman]

Originally Posted by Red

Interest rates will be much higher in 3-5 years. You can bank on it. The economy won't be in the toilet forever.

Define "much higher". Bumping the prime lending rate to 1.25% vs. 1% is a 25% increase. Anything above that I just don't see.

Just ask Japan.

Part of historically low interest rates means we've also never seen them raise after being this low. The government has hand cuffed themselves with an economy based on cheap money. Never again will we see the high interest rates of yesteryear. It's not just home prices that are effected by low interest rates. Consumer goods to multi-billion dollar industrial investments all rely on cheap money. The economy and as a result governments are addicted to cheap money and I don't see this changing any time soon.

But thats just like my opinion, man.

All I know is buying a house when chemgear was still crying wolf a few years ago worked out really well for me... Sorry chemgear, not trying to pick on you.

[1stLand]

Hey u guys, will this affect my existing mortgage??? (Green text)

What a dumb announcement of an announcement

[Travis Munroe]

^ no kidding. Any deals submit prior to May 1 are not applicable to the outrageous change. Something like $5 a month on a 300k property with 5% down.
Just received an email from a mortgage broker that states they plan on reviewing the rates every Q1. As it sits right now it has been 20+ years since the last change.
I wonder if this is a plan to raise rates higher over the span of 5 years?