The Government of Canada today announced changes to mortgage financing rules effective April 19th 2010. The lenders however, are likely to adopt the changes almost immediately so if you are in the process of thinking of buying a home, at the very least call your mortgage professional now and get pre-qualified. There are three main changes to mortgage financing rules and these are likely to affect the Barrie Real Estate market.1. The Govt. will require that all borrowers meet the standards for a five year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. Why are they doing this? Well simply put 5 year mortgage rates are around 4% at present, however, shorter terms are available at lower rates, e.g. 2 year fixed around 3.25%. This will mean that the debt service ratios will be based on paying a mortgage at 4% even if you are borrowing at 3.25%. This is likely to have an affect on the first time buyers as this segment of the market is the one that has less funds available. In my opinion this is actually a good move as particularly in the Barrie Real Estate market and the surrounding districts we are becoming a little overheated with many multiple offers and I see this as a way of stopping some of the excess speculation.

2. From April 19th the minimum downpayment for government backed mortgages (That means backed by you and I!!) will be 20% for  insurance on non-owner occupied properties. I.E. if you are an investor and purchaisng a home to rent out and you are seeking CMHC insurance you need to have a minimum of 20% down. Again this is seen as a way of curbing some of the speculation and is likely to slow down some of the demand for lower end single family homes. In the Barrie Real Estate market this is a very vibrant sector due to the college and student population. These changes could also mean that 2nd mortgages from private lenders will become popular to avoid having to use CMHC funding.

3. The Govt. will lower the refinancing level for your own home from 95% to 90%. This is unlikely to have a huge impact on local housing market in Barrie and just serves to encourage Canadians to view their homes as a way of creating equity and not using it as a cash machine. Overall a positive approach and one of prudence.

With the Barrie Real Estate market becoming a definite Sellers market and cities to the south such as Toronto positively presently ‘hot’ these measures will ensure that financing becomes more difficult. Hmm, wasn’t the govt. chastising the banks for not lending…? I don’t see this encouraging the banks to lend but rather giving them good reason not to lend based on more stringent lending criteria.  With the prospect of higher rates later in the year and a drain on the consumer in Ontario with the introduction of HST I wonder if the govt hasn’t just jumped on the brake a little too hard. Time will tell and we will continue to keep you updated with developments that may affect the local Barrie Real Estate market.

If you wish to discuss please don’t hesitate to call.

Sincerely, Ian Hocking.

Filed under: BarrieBarrie Real EstateInvestment Real EstateMortgage InformationRental/LeaseStatistics

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