No More 30 Year Mortgages

[Jay]

To be announced tomorrow...
http://www.theglobeandmail.com/news/...rticle4358876/

I'm curious what the members of this forum think of this move, and the affects it will have on the housing market.

[Chris L]

While nothing is certain, there is a huge amount of downward pressure on real estate. I would certainly not be looking to buy into the market at the moment. The government is hellbent on a controlled landing. If they achieve it, it will be a first. That much I know.

First 25 year ams, next new OFSI rules to tighten lending, then interest rate increases.

The run up in prices was due exclusively to lax lending and low borrowing costs when it should have had everything to do with a strong economy and rising incomes.

[Jay]

Perhaps my title was a bit premature... the actual announcement appears to be that the CMHC will no longer insure mortgages for longer than 25 years.
http://www.cbc.ca/news/business/stor...tightened.html

[dogcom]

I think it is a good idea because it should never have been put to 30+ in the first place.

Governments shouldn't be allowed to change the formula without very good reason up or down once the formula is set right.

I don't know why so many forum members like having these low down payment 30+ year mortgage conditions because other then greed it only hurts everyone down the road.

[Brenner]

I think it is a good idea because it should never have been put to 30+ in the first place.

Governments shouldn't be allowed to change the formula without very good reason up or down once the formula is set right.

I don't know why so many forum members like having these low down payment 30+ year mortgage conditions because other then greed it only hurts everyone down the road.

Agreed, they shouldn't have played around with it in the first place so the slow regression to the original rules is a good thing. Hopefully this takes some steam out of the markets along with the other credit tightening happening though I doubt it impacts my market much.

[sharbit]

Interesting, when will it be implemented?

[HaroldCrump]

What is there to stop a homeowner from keeping a 25 yr. amortization for every subsequent term renewal?

[Jay]

This will primarily effect marginal buyers - people with less than 20% down payments who could only afford their properties with a 30 year amortization. I wonder how much of the market this really represented? Buying property in those circumstances would seem like a terrible decision... is that one many are currently making? Perhaps even if that does only represent a few people, this will contribute to the general perception that real estate has peaked, and it's no longer a guaranteed investment... and more people will reconsider their property purchases.

[phrenk]

This is great news for folks like myself who have been waiting on the sidelines for a first purchase, while being able financially to afford a 20-30% downpayment.

I expect that in 6 months, the real correction will begin as the pre-approved loans (pre-announcement) expire. The difference between a 25 year amort and 30 year amort is quite substantial (approx. 15% increase in monthly payments). This could indicate that a drop of at least that magnitude should be expected in home prices, if not more.

[Sherlock]

This will primarily effect marginal buyers - people with less than 20% down payments who could only afford their properties with a 30 year amortization. I wonder how much of the market this really represented?

I think I read somewhere that the average downpayment for first-time home buyers is 7% and they usually choose the longest amortization available.