“I’m a Realtor, an elected official, and had lunch with a banker yesterday.
The changes in qualification and to line of credit ratios appear benign but will actually have a big effect in debt driven consumer markets such as Vancouver lower mainland.
Equity mortgages are basically dead. You must have income to support the mortgage and show where the income is originating via your tax form. Offshore investors slapping down 50% no questions asked are finished unless they show their declared income … not something they like to do.
Downsizing boomers, we are now in the first wave, who planned on cashing in the home, putting some money aside for income and taking out a little mortgage for new townhouse or condo are in trouble. Their retirement income will not qualify for a mortgage. I had three listings cancel last month, when these changes were announced, by boomers planning to downsize.
Small business is screwed because they now have to show their tax declared income, not their claimed income as was the practice here in BC.
Small builders, likewise. They can no longer get debt financing to start a new project based upon the equity in an existing build. They have to show income.
The rest of Canada may not understand that in BC, credit unions were giving out $350,000 mortgages for a pulse during the peak in 2006. Zero down, intent to pay based upon a claimed income.
The drug money now must show income. A big whack down is no longer sufficient.
Now throw in LOC ratio down from 80% to 65% and the BC practice of using your house equity as an auto teller is suddenly stifled.
Subtle changes but big impacts over the next year. My banker friends, as opposed to independent mortgage brokers, say a 10-15% correction is immediately conceivable.
A working family is looking at reduced prices and access to debt if they have jobs and income. The rules are returning to historical regulation. No income, no access to debt.”
Screws are tightening, and the effects won’t be smooth and steady.
At certain thresholds, things that were happening gradually can suddenly happen quickly.