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16 February 2010

Flaherty announces some major changes with CMHC today.

There really only appears to be 3 changes:

Change #1, he has increased the qualifying rate for variable rate mortgages from the current 3 year posted to 5 years…

At RBC the previous qualifying rate was 4.15% (3 year posted rate) and it is now 5.39%. An increase of 1.24%

Really all that they are doing is trying to stop people getting in over their heads with these ultra low rates, and make sure the mortgages are sustainable when rates eventually increase.

The effect of the change is even less with some of our other lenders like Macquarie, and First National who do not have separate posted and discounted rates…

The change with these lenders is going from 3.50% their current 3 year posted/discounted rate to 3.89% their current 5 year rate. This is only an increase of .39%, with these lenders.

Change #2 For mortgage refinances, this one is going to hurt a little…. CMHC has just announced the removal of 95% FINANCING ON REFINANCES, they have reduced the maximum mortgage to 90% on refinances. This will affect a significant number of clients looking to clear their debts.

Change #3

CMHC is getting out of the rental property business. They no longer want to insure non owner occupied properties.

This is a significant change for those purchasing rentals with minimal down payments.

What we are waiting for is the ripple effect with the lenders. No lenders have officially changed yet, but we expect announcements to follow today. What we are really going to be curious about is if GENWORTH follows with these changes or may lag with the changes to pick up a quick boost of market share.

Either way, the message is clear, lending is tightening up, if you think you might need to redo your mortgage and your new mortgage amount is any where near the 90-95% value range get your application in now, today.

Call me.

Flaherty moves to toughen mortgage rules

CBC News

Finance Minister Jim Flaherty announced new rules Tuesday aimed at preventing homebuyers from getting into financial difficulty when mortgage rates rise.

After consulting with major Canadian lenders, Flaherty outlined the latest weapons at Ottawa's disposal aimed at removing some of the speculative froth in the housing market.

"There is no evidence of a housing bubble, but we're taking prudent steps today to prevent one," he said at a news conference in Ottawa. "If some lenders aren't willing to act themselves, we will act."

Broadly speaking, the plan unveiled has three components.

First, Ottawa will require that all borrowers meet the standards for a five-year fixed-rate mortgage, even if they choose a variable mortgage with a lower rate or a shorter term.

"This will guard against higher rates in the future," Flaherty said.

Second, the rules would lower the maximum Canadians can withdraw when refinancing their mortgages to 90 per cent of the value of their home, from 95 per cent.

And finally, Ottawa will now require a minimum 20 per cent down payment to qualify for CMHC insurance for non-owner-occupied properties purchased as an investment.

The last rule is aimed at reining in would-be real estate speculators who own multiple properties beyond their primary residence.

Read more: http://www.cbc.ca/money/story/2010/02/16/mortgage-flaherty.html#ixzz0fiH4zfoi

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