“Let’s remember how we got here” – Looser and Looser CMHC Limits

Let’s remember how we got here:

• Prior to 1999 you needed 10% for a mortgage and that mortgage had a maximum amortization of 25 years. CMHC also had limits on how much you could buy with their insurance.

• Just after 1999 CMHC lowered the down payment to 5% with price limits on how much they would insure depending on the area. Amortizations were still 25 years. There would be no price limit on what they would insure if 10% or more was put down.

• By Sept. 2003 CMHC allowed 5% down on 25 yr amortizations but they removed all price ceiling limitations. Now any mortgage would be insured regardless of the value of home purchased.

• In March 2004 CMHC began allowing Flex-Down products which permitted the 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured.

• In March 2006 you had 0% down, 30 yr amortizations. This became 0% down, 35 yr amortizations later in the year. Interest only payments were allowed for 10 years.

• In November 2006 CMHC began allowing 0% down, 40 yr amortizations along with interest only payments for 10 years.

• Canadian banks ramped this up by allowing up to 7% cash back offers if you would take on a mortgage with them. You could basically get paid if you bought a house.

• Not only were the rules surrounding the granting of money loosened, but CMHC’s cap for granting mortgages grew from $100 Billion in 2006 to almost $600 Billion today.

– this fine summary from ‘golden_boy’ at VCI 11 Jun 2013 7:40am

31 responses to ““Let’s remember how we got here” – Looser and Looser CMHC Limits

  1. Mulroney introduced 5% down for first-timers in 1992, so the first point is out by 7 years.

  2. The Home Buyers’ Plan responds to requests from industry groups, provincial governments and individuals. It will assist Canadians in taking advantage of low mortgage rates, moderation in housing prices and the recently announced reduction in the downpayment required for CMHC-insured mortgages. It will support strong growth in the housing sector this year.

    The above quote comes from Don Mazankowski’s 1992 Budget speech. He doesn’t actually specify the “recently announced reduction in the Budget – I guess it was a separate announcement, – but I’m preetty sure that’s whne it was first reduced to 5%.

  3. UBCghettodweller

    I’m printing a copy of this and keeping it pinned above my desk. Next time someone tells me that there should be a soft landing and prices are this high in Vancouver because it’s the Best Place On Earth and everyone wants to live here, I’m going to show them this. Cheap, easy, debt. We’re all in trouble even if we weren’t stupid with our money.

  4. Very powerful seeing what happened enumerated like that. More profound is the ongoing belief in Canada on the “prudent” practices of Canadians despite evidence to the contrary. People are people, and when given license to spend many, if not most, will – until they can’t.

    • Really? I honestly did not get his point. What is he trying to say?

    • Which “he” are you talk about ? I keep hearing in various news sources and interactions with friends this talk about conservative and prudent Canadian finances. Reality though has been easy credit and resultant debt that made a bubble higher than it ever would have been without. Now the crash will be worse than it would have otherwise been.

      • I was referring to Golden Boy at VCI who wrote the post that this article is based upon……maybe I am just getting bored hearing the same damn thing over and over again. My mind is numb from the rhetoric and a point by point rehash is not even worth arguing with anymore even if it is wrong on some points.

  5. Agree with Raging Renter. Look back since 1955. The evolution of the mortgage market through the CMHC/NHA conduit has been a story over half a century in the making. Ripping out those decades-old roots isn’t a weekend job.

  6. VREAA you are lefty commie pinko subversive loser renter homeless scumbag. Everyone knows that real estate went up because more and more RIGHT THINKING Canadians decided to use their hard work and capital and buy homes. Its all losers and lefty pinko renting scum still trying to blame dear leader Harper and his faceless faithful minions for and explosion of the Canadian economy. You should be ashamed of yourself.

    Why if I had the gumption. I would start a civil/criminal proceeding against you that no one except my friends in the media could comment on (only casting doubt on your lefty pinko leanings and never whether I was guilty or not) and we could see each other in court 8-12 years from now.

  7. VREAA,
    I don’t know if you saw this, some of your readers did but I made a comprehensive list of amortizations, down payments, GDS ratios and more over the years. Not complete, its still a work in progress, but the most comprehensive list you will find.

    http://saskatoonhousingbubble.blogspot.ca/2013/04/a-look-at-down-payments-amortization.html

  8. Problem is people only look at minimum payment when deciding whether to buy a car or house or anything big. I know many people who only pay the minimum on their credit card because that’s what they think they need to pay. No wonder people can’t get ahead. But I don’t shame the banks and credit card companies, they are lending out my money to people to satisfy their primal urges of spend now and forget about the future. As an investor in many banks, energy companies, oil companies, and credit card companies, I sincerely would like to thank the people of Canada for giving me their hard earned cash and funding my early retirement.

    • UBCghettodweller

      Just the other day I had a salesman at a motorcycle dealership flat out ask me how much I could afford monthly when I asked about a slightly ratty, but rideable, older Honda rather than telling me what the selling price was. I informed him that I strongly agree with Einstein that compound interest really is the most powerful force in the universe- one, like gravity, I try to use to my advantage and not be a victim of. I wouldn’t be asking about the price if I could[n’t] pay it in one lump-sum.

  9. 4SlicesofCheese

    Trump coming to Vancouver on weds to officially announce the Vancouver trump project, sorry to say I will miss it as I still have a week left vacationing in Paris that was paid for in cash from all my savings and investing due to not having a mortgage in the BPOE.

  10. Spoke to an older gentleman who bought his home in the 70’s and now selling. He told me an interesting story of his ex-wife which may represent a lot of Vancouverites. She is unemployed. She had 250k left on her mortgage back in 2007 on her primary home. The bank encouraged her to take the equity in her home to purchase anther home. She bought a 2nd home at the peak. How does she pay the mortgage on both properties? By sharing a room with her daughter and renting out rooms individually. Is this a risky scenario or what?! How many people are in her situation?

    • june@hotmail.com

      It was a gamble, but some would say it was a well calculated gamble. Rental income in vancouver can range from $800-$2100, if she rented her 2nd home at that time it could easily generate $4,500-$5,000 per month in rental income. That would be enough to cover the mortgage, property tax & city utilitis, home insurance. Interest on the rental property is tax deductible and if the home was purchase in 2007 its surely doubled in price by 2013.

  11. Hey are using WordPress for your site platform? I’m new to the blog world but I’m
    trying to get started and create my own.
    Do you need any coding knowledge to make your own blog?
    Any help would be greatly appreciated!

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