Even your bankers are getting a headache over Canadian Finance Minister Bill Morneau's new federal mortgage lending rules for home buyers.
Interviewed by CTV's Meredith Macleod, mortgage expert Robert McLister (who writes for Canadian Mortgage Trends) said: “I don’t think this has been thought through at all,” He says the effect is that refinances, jumbo mortgages and rental business will have to be handed over by brokers and non-bank lenders to the banks. He believes that this will hurt competition and drive up mortgage rates and fees. “There was no industry consultation. Every lender I spoke to said they had no inkling this was coming. This is a big fat mistake”
Our real estate company, Keller Williams Select Realty of Halifax, Nova Scotia was paid a visit today by Darren Quigley who is a regional sales manager at Royal Bank. He also echoed the lack of consultation that was provided to the banking sector. Speaking for the real estate sector, the Canadian Real Estate Association, CREA, was also not consulted on the proposed changes, or how they might effect house values and market activity. Also, the desired beneficial effect of making homes more affordeable in the higher end markets might well create a larger than desired home price depression in markets like Atlantic Canada that have not been experiencing the overheated demand of Vancouver or Toronto. Certainly first time home buyer end of the market will be dampened considerably under the new rules, and this is a segment of the population that drives and spurs a great deal of market activity.
McLister believes that the changes are a “solution to a problem that doesn’t exist” because only one in 357 Canadian homeowners defaults on a mortgage. “Regulators are under intense pressure to do something because home prices are climbing fast and may be over-valued in some markets. They want to avoid any kind of catastrophe on their watch,” he said. “But the knee-jerk reaction will be so damaging, they could cause the sell-off they are trying to avoid.”
Let's hope McLister's opinions are not as dire as the reality! In any case, our strong recommendation to home buyers and prospective home sellers is CHECK WITH YOUR MORTGAGE LENDERS if you are in process of selling (and then re-purchasing a new home) or have been pre-qualified by a lender before these changes came into effect. They may well effect what time of home you can now afford!
Steve Ritchie ABR is a Broker Associate with Keller Williams Select Realty in Halifax. He is available to assist with your real estate needs through their MLS® enabled websites, and all other virtual and real communications platforms (voice,text, and person to person!) in the Halifax Metro area of Nova Scotia, Canada!