Thanks for joining us on a day of big changes for the housing sector. Please fire away with your questions.
Joe, the 25-year amortization applies to people who have a downpayment of less than 20% and thus require mortgage insurance to protect their lender against default. The government has not changed the rules for minimum downpayments, which means 5% is still the least you can pay when buying a home.
Dips, people buying homes for investments purposes are going to have to be able to swing a deal at a 25-year amortization rather than 30. That means higher carrying costs in the form of mortgage payments. The message I hear government sending to specualtive real estate buyers with minimum downpayments is: "Stop it."
I think it's a prudent move, but I don't agree it hurts young people. Some may not be able to afford a home now, but that just means they'll have to save more and put themselves in a better position to buy. If prices fall as a result of today's announcement, then that actually helps young people.
Jane, I've seen nothing to suggest this is retroactive. New mortgages will be affected as of July 9.
Chris, when first houses become unaffordable for a significant portion of the population, housing prices will fall. The housing market cannot be sustained just by established owners with big salaries.
Housing prices may well drop - if we're lucky it will be a nice, easy dip and nothing too wrenching. As for interest rates, I'm not sure they're going to rise much any time soon. The global economy is shaky. People looking to buy a house could end up with low rates and declining prices.
We have several people asking if they can still get a 30-year amortization on a mortgage if they have a downpayment of 20% or more. The answer is yes. The maxiumum 25-year amortization applies to people who have downpayments of less than 20%.
Snow, the changes are not retroactive - they just apply to new mortgages. So the terms of the mortgage you have remain the same.
Kerry, the mortgage changes seem to be aimed at first-time buyers, and I don't imagine that many of them are chasing $1-million homes. But that said, homes with a seven-figure pricetag could be caught in a general housing market price correction.
Agreed - expensive markets like Vancouver and Toronto will see the pool of buyers shrink.
Nancy, it's true that returning to the 25-year amortization is a "good for you" type of measure because it will get people paying off their mortgages sooner. But I think the higher payments will be a problem for quite a few people who plan to stretch themselves to get into the housing market. All of a sudden, a house becomes unaffordable.
Sunny, you are right and I have corrected that. Mortgage refinancings have been affected, not home-equity lines of credit.
It's amazing how the official attitude on housing has changed. Amortization periods were lengthened to allow more people to buy,
and now they're being shrunk to cool the housing market.
How about this afternoon? If you were to enter a bidding war for a home in Toronto, would you offer as you would have yesterday? I sure wouldn't.
Savers are forgotten in today's world. It's all about low rates, which are needed to keep the economy going but also encourage excessive borrowing. That brings us to today's mortgage announcement, which is all about slowing the housing market.
No set rule, depends on your situation. But how about 25:25:25:25?
Josh, I think that cooling the mortgage market could actually help the Bank of Canada keep rates lower for longer. There may be less need to jack up rates to discourage over-borrowing.
Not to worry - let the flurry of buying happen and then wait for things to shake out. Prices may fall, and that could take the edge off the higher mortgage payments that result from amortizing over 25 years instead of 30.
I've seen nothing along these lines. Traditionally, banks have made mortgage loans based on the best information available and then continued to rely on that information without requalifying at renewal. Requalifying could open quite a can of worms.
Possibly, Adam. The government may be thinking that rates will stay low for quite a while, thereby sending the housing market to new heights without some intervention.
I've seen nothing along these lines. Traditionally, banks have made mortgage loans based on the best information available and then continued to rely on that information without requalifying at renewal. Requalifying could open quite a can of worms.
Is it just me? How do people out of school with big student loans possibly save 10-20% for a house when the average house in cities costs $300k+ Carney and Flaherty's kids no doubt have their schooling and downpayments pd for --- but for many young Canadians that first house will be an impossibility.
Prior to the last decade, mortgages were always amortized to a maximum of 25 years. Going back to this formula shouldn't be much of a problem for most home-buyers...especially when you look at how much interest you'll save! Purchasers of property to be owner-occupied can still buy with a 5% downpayment.
