Tag Archives: OFSI

Monday Mortgage Update: June 11, 2012

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Fixed Rates

5-year Government of Canada (GoC) bonds finished last week at 1.29%, up 23 basis points (0.23%) from two Fridays ago, where they were sitting at a record Canadian low. Overall, 5-year bonds are still at historic lows. We have seen a few lenders to drop their respective 5-year fixed rate over the past few days. The lowest available 5-year fixed rate on Ratehub is now 3.04%.

New Mortgage Rules

Major news emerged last week as OFSI backed down on a couple of proposals designed to tighten mortgage underwriting. The first proposal would have required borrowers to re-qualify each time they renewed their mortgage. Currently, lenders focus on the borrower’s payment history. OFSI agreed that this approach is effective and will remain in place.

The second proposal that was dismissed would have had banks amortize home equity lines of credit (HELOC). In other words, borrowers would have been expected to pay back the loans taken from their home equity over a set period of time.
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Notable News of the Week: June 1, 2012

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Every week, Ratehub delivers the Notable News of the Week. We compile and summarize the most interesting and relevant headlines to keep you informed with the latest from the Canadian mortgage and housing industry. This week, reports emerged declaring home prices are still rising in major city centres, as well as continued growing concerns of a housing meltdown.

The best time for mortgage renewals and payment increases — The Globe and Mail

If you bought a home five years ago, chances are it’s now time to renew. And since mortgage rates have dropped considerably since 2007, there are two paths you can take. You can either let todays’ low mortgage rates reduce your monthly payments, or keep your payments where they are and use the differential to pay down your mortgage faster.

Canadian home prices still rising in most big cities — Financial Post

April was a great time to sell as home prices rose for the second straight month in nine of eleven metropolitan markets. However, the pace of growth continued to slow on a yearly basis. Toronto and Montreal experienced gains of 0.8%, matching the national average. However, Vancouver – Canada’s most expensive property market – experienced a small increase, while prices dropped in Victoria and Quebec City. Canada’s major concerns are its robust housing market and high household debt levels. Record-low borrowing costs have sent house prices and sales soaring.
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Notable News of the Week: April 27, 2012

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This week in mortgage and housing news, Canada’s Finance Minister announced a change for the CMHC which should lead to a tightening of mortgage credit. Also, we are seeing record levels of condo activity in a city other than Vancouver and Toronto.

New Mortgage Changes From Jim Flaherty

Canada’s Finance Minister, Jim Flaherty made headlines this week when he announced that Ottawa would once again step into housing market regulations in an effort to cool the market.

The Canadian Mortgage and Housing Corporation (CMHC), which was formerly under the jurisdiction of the minister responsible for Human Resources and Skills Development Canada, will now fall under the high standards of the Office of the Superintendent of Financial Institutions (OFSI). Originally, the CMHC was intended to assist social housing, but according to Mr. Flaherty, “[they] evolved into a key pillar of Canada’s overall housing market, providing government backing to lenders…on high leverage mortgages.”

Initially, the CMHC guarantee was to help stabilize the housing market during the financial crisis in 2008 and 2009 by encouraging the banks to keep lending. But that same measure that helped Canada through the credit squeeze is now contributing to today’s overheated housing market. The Toronto Star reports that the CMHC now insures nearly 50% of Canada’s mortgage industry – that’s $550 billion in outstanding residential mortgage credit.

The big question is: Will this work?

Having OFSI oversee the CMHC’s jurisdiction isn’t exactly a ground-shaking move, but according to The Financial Post, the government’s moves are designed for a soft landing as opposed to a hard-stop with direct economic consquences.

“The idea is that by gradually tightening up lending standards around CMHC insured mortgages, the ‘froth’ will be removed from the market and equilibrium will return.”

However, they contend that the Canadian housing market is anything but normal. Nonetheless, Ben Rabidoux for Macleans writes, “Putting CMHC into OSFI hands may well represent a greater tightening of credit than Flaherty could have done by shortening amortization lengths or increasing down payments.“ He believes significant changes will happen.
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