This morning, the federal government announced the following changes to the rules for government-backed insured mortgages:
- All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term.
- The maximum amount Canadians can withdraw in refinancing their mortgages will be 90 per cent of the value of their homes.
- The government will require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
The adjustments take effect April 19, 2010. Exceptions would be allowed after April 19 where they are needed to satisfy a binding purchase and sale, financing, or refinancing agreement entered into before April 19, 2010.
The federal government news release can be found at http://www.fin.gc.ca/n10/10-011-eng.asp while the backgrounder can be found at http://www.fin.gc.ca/n10/data/10-011_1-eng.asp.
GVHBA CEO Peter Simpson is already responding to the media with the concern if homebuyers perceive this as a barrier to home ownership, then this measure, coupled with a potential mid-year increase in interest rates, and the implementation of HST on July 1, could create the “perfect storm” of buyer resistance. Peter told the media that GVHBA has always encouraged homebuyers to purchase homes within their means. He also advised the media it is puzzling the Finance Minister would implement such measures when he believes there is no housing bubble.
FEEDBACK PLEASE
We estimate you will now need to earn an extra $20,000 in income annually to qualify for a mortgage to buy a new, single-detached home in Metro Vancouver. We have varying reports on what are the appropriate down payment, amortization, and interest rates to use for calculations.
We are also concerned with the third initiative to require 20 per cent down on investor condos.
In order to most effectively respond to the federal government we need some feedback on the level of deposits currently being required in today’s market and your general reaction to today’s announcement by the federal government.
Please provide your feedback to me at amy@gvhba.org or 604-565-4288.
Posted by:
Amy Spencer-Chubey, BA l Director of Government Relations
Greater Vancouver Home Builders’ Association
#1003, 7495 132 Street l Surrey, BC V3W 1J8
