The Repercussions of the New Mortgage Regulations – Consult a Vancouver Mortgage Broker

The Repercussions of the New Mortgage Regulations – Consult a Vancouver Mortgage Broker

Well, we’ve all heard of the new mortgage changes and we’ve seen them come into effect, but have they really made any sort of impact on what’s happening out there in mortgage land? Did finance minister Flaherty succeed with what he intended with the new regulations, and have the changes had an affect on new home purchasers?

Well, the answer is yes, and there is some positive data that backs this up. We were all pretty much expecting that the new mortgage regulations in beefing up the those high ratio mortgages and those home buyers who had less than a 20% down payment would feel the crunch but now we know just by how much.

New Mortgage Regulations and  CMHC

Minister Flaherty was pretty much right on the mark in anticipating that the new regulations would affect less than 5% of those buying new homes. In fact, the Canada Mortgage and Housing Corporation says that for the 3 months which ended on September 30 of this year, new home purchase volumes which were insured dropped by 6%.

The biggest group of home buyers who were affected by the new mortgage regulations were those home buyers who were using less than a 20% down payment as these people who were prospective home buyers dropped by a fairly significant 22%.

How did these changes affect CMHC overall? The answer is quite a bit actually because their numbers for insured residents dropped by 37% which works out to almost just under 55,000  fewer housing units.

One of the reasons why the government imposed these new regulations was due to the reason that  CMHC was rapidly approaching it’s the imposed government ceiling of $600 billion. Currently  CMHC has just over $578 billion in outstanding insurance and this amount has been holding steady.

For CMHC, this works out to being just about around 4% under the imposed ceiling of the federal government which has been capped at the $600 billion mark. Many believe that this ceiling would have been surpassed had the government not imposed the new regulations.

It is also clear that Minister Flaherty is hoping that private insurers will take a share of  CMHC’s market. This will likely have a number of different ramifications for monoline lenders who don’t take deposits but which rely more on securitization instead.

How Does this Affect Consumers?

It’s quite obvious there will be an impact because as new lending rules affect mortgage lenders, these effects are simply going to be passed down to borrowers. Generally, this means that small lenders will end up having to raise their rates, which means that the larger lenders won’t have to be as competitive as they use to be in trying to match these lower rates. It simply means that consumers aren’t going to find many deals and will be paying more in overall interest rates.

Also, it seems apparent that if  CMHC is handling less when it comes to bulk insurance than this means that conventional mortgages will be less liquid and that overall mortgage rates will tend to be somewhat higher.

As aVancouvermortgage broker, we will be keeping a close eye on how this might impact you down the road, and will keep you apprised of any new changes and effects this might have on you as a borrower.