I just got sent a link on Facebook that CTV says Jim Flaherty has called a news conference to outline the rule changes that he has agreed on. Here is also another story with a little more detail from the National Post.
The reason I say it comes out of no where is I am sure all of us were expecting him to announce it along with the budget. To call a news conference and leak it late on a Sunday night is certainly odd.
Anyway, here is what CTV is reporting that the government will change:
- Maximum Amortizations will be reduced from 35 years to 30
- Maximum Loan to Value for refinances will be reduced from 90% to 85%
- The government will no longer offer insurance for Lines of credit
Numbers two and three were not even in the rumour mill that I am aware of. It is an interesting perspective that the governments concern was on overall debt and spiralling house prices, yet the only thing they chose to do to cool down house prices is lower the amortizations. Don’t get me wrong this will have an effect but not as much as increasing minimum down payments, and increasing condo fee qualification requirements.
I am not sure that reducing insurance on lines of credit will have much effect, and reducing maximum amortizations will have an effect on overall debt loads but again minimal.
Condo developers certainly will sleep a little easier tonight I am sure.
As for us in the Real Estate Industry, I think we should also breathe a little easier. It could have been worse I think.
Garth Turner will be hopping mad, can’t wait to see what he will say about his friend F.
What are your thoughts?
Comments
Powered by Facebook Comments
By Rob Reynar, January 17, 2011 @ 4:38 am
This is a political move more than anything. Changing the amortization to 30 years is just another step towards 25 years, which was the old normal that we’ve all forgotten. On the LTV for refinances, again it’s a prudent move to try and stem Canadians insatiable taste for cheap money. Household debt is out of control and the Government just needs an I told you so when inflation takes hold. The 3rd just reduces their liability if something goofy happens that no one is expecting. That’s twice that Flaherty has stopped short of the rumours when it comes to Mortgage changes, good for him. The rumoured changes to condo fee qualification requirements would have been a disaster, think the condo market is soft now! I think this could have gone A LOT worse for the industry.
By Greg Williamson, January 17, 2011 @ 5:05 am
Couldn’t agree more Rob. Good insight on the fact that this is the second time he fell short of the rumours. I wrote earlier today that it is possible they would come in lighter due to an upcoming election, and what will likely be a tough budget.
The condo developers etc. dodged a big bullet no doubt, but we all dodged one as well if down payments would have been increased. I think with higher rates an absolute certainty, check my post from earlier today for a link, and lower amortizations, a small price slide is not wholly out of the question I think.