Mortgage Rules

[timber2012]

Back to the topic -

how does the new mortgage rules effect the typical home in the greater vancouver area?

I say it has no effect.

I'm surprised you would say that. It seems to me that the bit of hard data we have on this is that 40% of mortgages nationally are 30 year terms. Ceteris paribus, it should be >40% in local markets with higher price:income ratios. Going forward, you have to assume that some (I think a high) proportion of people will still be purchasing based on their present carrying costs, which just went up for probably half of the local market, give or take. Polls have shown that a high percentage of people are maxxing out based on what they can afford at present rates and taking the longest possible terms to get into this "crazy" market. So I think it will have a huge impact in Vancouver proper - less so in the less inflated markets where price:income isn't so outlandish. In terms of product mix, everyone said houses were immune to the downturn pre 2008 as well but SFHs crashed more than other product mixes at the time, non? But for the specker condo flipper covering that mortgage payment with rental income just got a whole lot harder than it was with a 40 year term so even though it hasn't appreciated as rapidly that segment should be in for a smack in the pants too, methinks.

Am I missing something here, Timber? Why don't you think it will have an impact?

I think that the commoner has become a lemming - they'll figure out a way around the rules. Whether they get the DP from somewhere else (credit line) or they fake rental income on the home (to give the impression of higher income to cover gds).

For some reason, people in Vancouver are stupid when it comes to real estate. They'd rather shovel their entire life's savings and income into a home than actually live life. I don't care how nice of a city Vancouver is perceived to be (I don't agree with that by the way - there are many places I'd rather live than Vancouver all things being equal), if I couldn't afford some of the nicer things in life because I was spending too much on housing, I'd move.

I guess the real reason I don't think it will have an effect is because we've had two or three mortgage rule changes that have done virtually nothing to slow our market. If our market slows, I think it will be because of something else.

[timber2012]

So Mr. Real Estate Guru and his lovely wife decide they want to jump into the Vancouver market 4 years ago and buy a home. Their local pumper has advised them it's a great time to buy and the government has assisted by loosening lending laws so that these two minimum wage earners could buy a home in East Vancouver and laugh at their friends who still commute from the burbs or live in a shoebox. Of course the only way they can afford to live in their house is never go on vacation, rent out the basement to some loser bears and rent out their spare room to a Japanese student...oh, and by taking a 40 year amortization on their mortgage.

They take on a 5 year term on their mortgage at a variable rate and pay the minimum.

5 years is coming up real soon.

They have 35 year term left. Or do they? 25 year maximum mortgages start today.

Can someone clarify?

[thirdlittlepig]

My understanding (not an expert) is that there is no problem as long as there are no changes. So same lender, same term etc. But if you want to shop around for a different lender or refinance or want to borrow against the house (not sure where current lines of credit stand) you are s.o.l. So no more borrowing for vacations, renovations, kids college, starting a home business, car loans, covering maternity leaves, or reduced employment etc. which apparently a lot of baby boomers have been doing. There are many people facing a shortfall due to these issues and have to suddenly come up with a large chunk of money to meet the new regs. Maybe the alternative is the bank gives them a separate loan (and no doubt less attractive rates) if they have otherwise been in good standing, or people start putting more on their credit cards (definitely unpaid balances are increasing),or people have to find their own "No Credit, No Problem" type of lender, or hit up relatives for personal loans. Other people who I could see being in trouble are those who were hanging on to old house, while buying new house, so may be carrying two mortgages, and thought they'd eventually sell when the buyers were more eager. We can see how that's working out with high inventory.

[tdma800]

I don't care how nice of a city Vancouver is perceived to be (I don't agree with that by the way - there are many places I'd rather live than Vancouver all things being equal), if I couldn't afford some of the nicer things in life because I was spending too much on housing, I'd move.

http://en.wikipedia.org/wiki/English_Bay_(Vancouver)

[tdma800]

and rent out their spare room to a Japanese student...

http://en.wikipedia.org/wiki/Racism

[timber2012]

I don't care how nice of a city Vancouver is perceived to be (I don't agree with that by the way - there are many places I'd rather live than Vancouver all things being equal), if I couldn't afford some of the nicer things in life because I was spending too much on housing, I'd move.

http://en.wikipedia.org/wiki/English_Bay_(Vancouver)

Not sure what your point is.... or do you, as usual, not have one.

[timber2012]

and rent out their spare room to a Japanese student...

http://en.wikipedia.org/wiki/Racism

http://en.wikipedia.org/wiki/Troll_(Internet)

[tdma800]

and rent out their spare room to a Japanese student...

http://en.wikipedia.org/wiki/Racism

http://en.wikipedia.org/wiki/Troll_(Internet)

Takes 1 to know 1

[bcj]

So Mr. Real Estate Guru and his lovely wife decide they want to jump into the Vancouver market 4 years ago and buy a home. Their local pumper has advised them it's a great time to buy and the government has assisted by loosening lending laws so that these two minimum wage earners could buy a home in East Vancouver and laugh at their friends who still commute from the burbs or live in a shoebox. Of course the only way they can afford to live in their house is never go on vacation, rent out the basement to some loser bears and rent out their spare room to a Japanese student...oh, and by taking a 40 year amortization on their mortgage.

They take on a 5 year term on their mortgage at a variable rate and pay the minimum.

5 years is coming up real soon.

They have 35 year term left. Or do they? 25 year maximum mortgages start today.

Can someone clarify?

http://www.theglobeandmail.com/globe-in ... le4389044/

Long story short, don't expect a deeply discounted rate because they won't have the ability to shop around at refinance.

[timber2012]

http://en.wikipedia.org/wiki/Racism

http://en.wikipedia.org/wiki/Troll_(Internet)

Takes 1 to know 1

Interesting then how you would be able to "know" racism.

Nervous times, eh?

[bcj]

and rent out their spare room to a Japanese student...

http://en.wikipedia.org/wiki/Racism

Geez, what a racist... bring on the human rights tribunal.

[Taipan]

Without doubt the most important and long ranging issue for real estate in Canada this month is the change of mortgage rules today.

I read somewhere in the last 24 hours that almost half of Canadians arent even aware of the changes. Of the 50% who do I wonder how many really understand how it will affect their lives.

It will and it will hurt.

Two simple things for Vancouver.

1) Introduce the change of rules when stock is very tight, would soften the market. Maybe even a soft landing.

2) To introduce these changes when you have record high numbers of properties for sale and at record high prices (or near there to for both), indicates that prices will deflate now pretty hard. Why? Government caused this bubble by shifting the FIT rules, and by now pulling them back, they will pop the bubble completely. No soft landing - Just a nasty crash.

Anyway Carney and Flaherty have been warning you for the last few years and now they have well and truly pulled the trigger.

Here are the harsh numbers and how the changing of interest rates, terms and availability either boosts prices as you move to the top left, or smash prices as you move towards the bottom right.

[rofina]

Chances are they will be renewing at posted rates. That could hurt given the likely 2% increase.

[Taipan]

And this is what its all about.

It isnt about mainland chinese
It isnt about buy now or be priced out forever.
It isnt about a lack of supply

Its all about F.I.T. and over the coming months prices will start to plunge.

And why will they plunge?

Quite simple. If you had buyers with 20% down they would wait and hesitate.

With 5% down all the way up and even 0% down, that means vendors will panic and prices will now plunge.

You just have to hope that you dont get a financial mealtdown out of europe or it will be twice as bad.

[tdma800]

And this is what its all about.

Its about the mainland chinese.
Its about buying now or being priced out forever.
Its about renting is throwing money away.
Its about a lack of land in Vancouver.