Global BC TV: New Mortgage Rules In 9 Days – “Sales surge; Move Quickly; Deadline; Compromise; Buy Lesser Property Right-Away”

Global BC TV, 9 Mar 2011
CHRIS GALUS: “One factor that’s fuelling the real estate market right now is the change in lending rules that will take effect in a week and a half. That’s when mortgages will get a little tighter and you’ll have to pay them back faster. And a sales surge was expected as many first time buyers move quickly to meet that deadline. Ann Drewa explains why…”
ANN DREWA (REPORTER): “Vancouver real estate doesn’t seem to be cooling down, and for first time homebuyers it’s about to get even more difficult to plunge into the market. On March 18th new lending rules will apply. The federal government will reduce the maximum amortization period for government insured mortgages from 35 years to 30.”

ANGELA CALLA (Mortgage broker, & host of ‘The Mortgage Show’ on CKNW): “It’s not a bad thing. When you have 30 percent of borrowers in the last three years since they’ve been available going into longer amortizations you have to look at the reason why people get home ownership is for security and affordability, and if a market changes you want to ensure that people can still have control of their home, and that’s why they have their home in the first place. So this protects people.”

ANN DREWA: “The new rules apply to potential buyers who are only able to put down less than 20 percent on a down payment. For example, for a $300,000 property with a fixed rate of 3.79 percent, under a 35-year amortization monthly payments would be $1,285. Compare that with a 30-year amortization, monthly payments rise to almost $1,400. That works out to an extra $106 a month.”

ANGELA CALLA: “It might not take them out of the market completely, but they’ll certainly have to have some consideration to the lifestyle that they have and possibly won’t be able to have that extra dinner out a month.”

ANN DREWA: “The reason why the federal government is scaling back is to keep Canadians from swimming in debt and to avoid the economic catastrophe south of the border. In addition, the move is likely to prepare for higher interest rates.”

ANN DREWA: “For real estate agents like Carsten Love clients are trying to beat the looming deadline. For those that don’t make it, they’ll have to make some tough decisions.”
CARSTEN LOVE: “They’re going to have to decide that are they going to wait and try to save up more money, wait for their income to rise so that they can again afford the property that they wanted to buy, or do they buy right away but the lesser property, a property that they weren’t expecting to buy.”

ANN DREWA: “It may seem like a compromise now, but it could mean avoiding a financial disaster in the future.”

[thanks to GreenhornRET for the video, and to Angela for the transcription]

9 responses to “Global BC TV: New Mortgage Rules In 9 Days – “Sales surge; Move Quickly; Deadline; Compromise; Buy Lesser Property Right-Away”

  1. So, I guess it is safe to say that the so called tightening of the rules had the desired effect (as we saw in early 2010)? If TPTB really wanted to cool the market down (and why would they?), they would crank rates up ASAP. I don’t see this happening anytime soon.

  2. pricedoutfornow

    Didn’t the US market collapse when finally, prices were just too high and there were very few new entrants into the market? I wonder if we will reach this point sometime in the future? I know the Okanagan market seems to be suffering as no new people are moving there (as noted recently by the City, which released a report which stated they had zero population growth), and houses just aren’t selling.
    A Ponzi scheme collapses when there are no new entrants. I wonder if all the news stories about HAM will have the opposite effect than intended on first time buyers. I’m a potential FTB and every time I hear one of the stories I just think “Screw it, I’ll never buy a house here, might as well just admit I’ll be renting for the rest of my life.” (which is not a bad thing when rent is cheaper than owning).

    • The US bubble collapsed as the central bank started incrementally raising interest rates out of the post-tech bubble recession. It took a couple years, but finally the escalating prices, matched with raising interest rates found that point where it just got too costly.

      Canada’s immediate situation may be most analogous to when they ended the “first-time homebuyer tax credit” which was introduced after the bank collapse in order to goose the economy. As it was coming to an end, there was a “must buy now” mentality, and it even got home prices moving upwards again temporarily. When it expired in Spring 2010, sales fell steeply and prices began falling again.

      The changing rules in Canada would play out similarly for local buyers, but who knows if it will affect the Chinese buyers at all.

  3. “It may seem like a compromise now, but it could mean avoiding a financial disaster in the future.”

    So not rushing out to buy a compromise house in the next week is not a financial disaster. In fact, doing it means avoiding a financial disaster. This bubble is like a cancer eating people’s brains.

  4. It’s funny that the only two options for new buyers are: 1) buy a smaller property now or 2) wait until you are earning more money. But wait, if new buyers cannot afford to buy the cheap houses/condos now, then who’s going to buy these properties?

    Anyways … about the previous post, BoC will only increase rates if inflation starts to creep up (their mandate is not to control house price bubbles in Canada). Inflation might increase with oil prices reaching high levels again, therefore the conflicts in Africa/Middle East might help pop the housing bubble in Vancouver, but really who knows if oil will reach $150 anytime soon …

  5. OMFG.

    That’s all I have to say about that.

  6. A part of that newscast that stuck with me was where the reporter is talking to the developer and he says that Mainland Chinese are buying teardowns to pay as little HST as possible. The reporter goes: “Smart.” Developer, with reverence, says: “Very smart.” It just grated my nerves. Ooooooh, they’re such smart and savvy investors, they’re avoiding paying tax. Wow! Local Vancouverites would never be smart enough to try to save tax. Wish I could be like that. Unfortunately I’m just not business-minded enough. I guess that’s why they’re savvy investors and I’m not.

    • They’d save even more money if they just lived in the house on the property they bought.
      The houses they were buying didn’t even appear to be teardowns.

  7. House prices are stupidly high in vancouver. I bought last year after selling off alot of toys and scrimping and saving. My 3rd property other 2 were in affordable areas winnipeg and saskatchewan. House prices here are geared toward offshore money, now even more. I had to pay 5 grand for the land tranfer tax(bc only rip off). I would be happy with a house price reduction, as it is impossible here to buy for anyone who is starting out. My assesment up 15k in 1 year(why) Tax grab from the city. The bubble is coming with the demographic shift lotsa houses being sold for downsizing, should be a better market in 5 years with lower prices. Just too many money grabbers looking to buy flip sell, the bubble will burst. 5 years my brothers place went 278 k up to 478 k this year why tax grab. Qualification is a problem with these prices a big problem. I am a licensed general contractor also. Regards Russ

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