Well, CMHC rules are getting tighter...

[stillsleepy]

Not sure how much people here like discussing Real Estate in general, but as you are aware (or will soon be) it looks like Flaherty is tightening up on the lending standards of our wonderful crown insurance corp, the CMHC.

http://www.cbc.ca/money/story/2011/01/17/flaherty-mortgage-changes.html

Highlights:
    * The maximum amortization period for a government-insured mortgage was lowered from 35 to 30 years.
    * The upper limit that Canadians can borrow against their home equity was lowered from 90 per cent to 85 per cent.
    * Government insurance backing on home equity lines of credit, or HELOCs, has been removed.


I have for a long time suspected that Canada (at least, parts of it) was due for a severe downward swing in the RE market. These actions however look like they may soften the blow, or eliminate it altogether. On the other hand, with a March 18th deadline before the rules set in, this might just create a rush till March, and THEN a severe downturn 

Thoughts & Opinions?

Also, if this is in the wrong section feel free to move it.. Couldn't really find a truly "general RE discussion" section

[MHT]

I don't really think that the new rules will affect much.  Thankfully they did not touch the 5% minimum downpayment as that would really hurt.  The thing that I think it strange is that the government keeps talking about how much household debt people are carrying however, it is not generally mortgage debt that gets people into trouble, it is consumer debt such as credit cards, buy now pay later programs, etc.  Those are the things that they should be trying to reduce.  Mortgage debt is an investment, the others are not.

[shah]

I agree with you. The credit card interest rates should not be rock high as much as 29.9%. Banks should not be allowed to charge more than posted prime rate plus 10%.

[stillsleepy]

I don't really think that the new rules will affect much.  Thankfully they did not touch the 5% minimum downpayment as that would really hurt.  The thing that I think it strange is that the government keeps talking about how much household debt people are carrying however, it is not generally mortgage debt that gets people into trouble, it is consumer debt such as credit cards, buy now pay later programs, etc.  Those are the things that they should be trying to reduce.  Mortgage debt is an investment, the others are not.

In some sense I agree, but the other side of it is that the CC payments are a lot easier to ignore, forget, or put off. A mortgage payment is generally the priority for most people, whether or not they can sustain making those payments.

Another thing is that RE is only an "investment" if the prices continue to rise and, depending on the circumstances, maybe if you continue to live in the property through the life of the mortgage and beyond. Also, if interest rates go up then a fixed rate mortgage will only protect people till renewal time which in many cases is <=5 years.

I think the key issue is that when it is mortgage debt that starts getting people into trouble, it will be a self propagating reaction in the RE market with the potential for a huge downturn... Which wouldn't be good given just how much of the economy is now centred on Real Estate in Canada...

[Pfm1011]

Banks should not be allowed to charge more than posted prime rate plus 10%.

You will never see the Government do anything like that as they all need board of Director positions when they retire from politics. Heaven forbid we mess with the banks billions