Good news for qualified Victoria real estate buyers

November 20, 2012

A November 2012 report by the Canadian Association of Accredited Mortgage Professionals argues that recent changes to federally-backed mortgage loan insurance qualification criteria are cooling the resale market and reducing prices.

An October survey of 2,000 consumers by the Canadian Association of Accredited Mortgage Professionals (CAAMP) suggests first-time buyers have been hard hit by tighter mortgage rules introduced in June 2012.

Under the new rules introduced by the federal government, criteria for federally-backed mortgage loan insurance includes: reduce maximum insured refinancing to 80% from 85%; elimination of insurance for homes priced over $1 million ; reduce maximum amortization to 25 years from 30 years; minimum credit scores for 39% GDS and 44% TDS ratios.

Finance Minister Jim Flaherty has said the new rules were intended to deal with overpriced real estate in certain cities and certain types of housing. He has said the tighter mortgage rules reduce the risk of buyers taking on too much debt.

Meanwhile CAAMP argues the changes have taken too big a bite out of an already cooling housing market and have asked policymakers to revisit the industry and criteria.

Will Dunning, CAAMP Chief Economist, says first-time buyers have been hardest hit by the tighter mortgage rules and that the smaller number of first-time buyers has affected the resale market.

"The housing resale numbers behave like a canary in the mine for us," Dunning said. "My concern is that a policy-induced housing market downturn creates unnecessary risk that directly affects not just housing but job creation and the economy as a whole."

The June 2012 changes were the latest in a series of changes over the last several years that have reduced the maximum amortization for mortgages. Previous reforms included reductions in the amortization period to 35 years from 40 and then to 30 years from 35.

This is good news for qualified Victoria real estate buyers borrowing with or without federally-backed mortgage loan insurance. Fewer competing purchasers mean fewer bidding wars and, ultimately, lower prices.


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