40 year mortgages, and Zero down may not be gone after all
There are many news articles abound that suggest that CMHC’s competitors AIG, PMI, and Genworth are poised to announce that they will continue to offer the popular products. You may ask how this could happen if the government has said you can’t.The government only has control over the market in this regard if you insure through CMHC or more specifically if the lender raises the mortgage dollars through the Canada Mortgage Bond which is run by CMHC. The reason the government was getting involved in a market that was performing well remains a bit of an annoyance anyway, but what was really surprising was how fast the main mortgage lenders jumped on this? I think that if the group of competitive insurers is able to pull this off then there will be some very interesting competitive times in the Canadian mortgage industry.Why? The main lenders have played their cards by supporting CMHC. Non-banks like Merix financial, First National will likely continue to offer the products if they can get an insurer which will mean Mortgage brokers will enjoy a competitive advantage as Realtors will know where to get these popular products for their clients. What will happen long term is unclear, but I am sure the government will not like that their intervention in the market is having limited effect. All they do is bring CMHC’s 70% market share down. We will have to wait and see. Personally, I think the 40 year amortization to 35 years is no big deal for most people, but the ZERO down option has been good and not abused, particularly in Alberta where young people have great incomes and ability to pay, but struggle with the time required to save a down payment as they watch home prices steadily increase. Finally the requirement to have a 620 beacon score will likely have the biggest effect as this is high in my opinion. I could see regardless of the government forcing the other insurers to get in line on amortization and down payment, they will not be able to force them on the 620 beacon.Let’s hope the other insurers are successful in finding alternate funding (other then the Canada Mortgage Bond) for their lender clients so they can show the government that intervention in a well functioning market should not be considered by governments EVER and that market forces and competition should be left alone.
