OSFI, Canada’s banking regulator, is leaning on banks and other federally regulated lenders to clamp down on underwriting practices. It released these draft recommendations this week.
After reading through 18 pages of changes, in detail, our immediate reaction was concern.
That’s not because the guidelines are greatly imprudent. Some are unnecessarily rigid, but most are sound policy. It’s because OSFI risks tightening too much, too fast.
If the government also decrees new insured mortgage regulations (like these), and/or rates rise significantly, and/or unemployment unexpectedly spikes, it could form the proverbial perfect storm that blows over housing valuations.
For debtors, today’s historically low interest rates have constituted somewhat of a fool’s paradise. Central banks around the world, including Canada’s, have kept interest rates as close to zero as possible.
But if we thought we could keep our boat forever afloat on this sea of low rates, there are many lining up to convince us the time has come to get on dryer land.
Whenever they get a chance, Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty warn Canadians to get their fiscal houses in order. It’s not a matter of IF interest rates start rising, just a matter of WHEN.
And on Friday, TD Canada Trust Chief Economist Craig Alexander joined in, with a stern warning that debt levels have risen to “unsustainable” levels. He said without new mortgage regulations to temper borrowing, a correction in housing prices or a hike in interest rates would be “disastrous for the economy.”
Some 45% of Ontario brokers/agents are procrastinating on re-licensing.
It has come down to the wire for nearly half of Ontario’s 12,000 mortgage professionals – who, with only a month left on the clock, had yet to complete that do-or-die re-licensing course.
“What can I say? That’s the industry,” Joe Rosati, IMBA Executive Director, told MortgageBrokerNews.ca. “FSCO told us that as of February 29th, only 55% of mortgage brokers and agents in the province had successfully completed the required relicensing course.”
That slim majority means as many as 5,000 mortgage professionals, nonetheless, have waited until the last month to take the course.
For IMBA and the three other course providers, that procrastination now translates into a flurry of activity in the last two weeks before the March 31st deadline.
Missing that drop-dead date has major consequences. Not only does the broker’s licence expire, but if he or she attempts to re-apply as a new agent or broker, they’ll be required to admit “non-compliance” and take the re-licensing education by June 30th, 2012. They’ll also have to dig deeper in their pockets and pay the $800 fee for a new agent or broker licence rather than the $700 fee to renew.
Fixed-rate mortgages are at historic lows but if you’re locked into a contract with your bank, those benefits may be yet elusive.
First you have to do the math to see if breaking your contract is worth the penalties you may face.
“There is no grey area,” says Cindy David, a certified financial planner at Dupuis Langen Financial Management Ltd in Vancouver. “It’s either worth it or it’s not.”
“We’re even seeing 10-year fixed-rate mortgages at 3.99%,” says David. “Think about that: Interest and principal at 3.99% for 10 years. From a financial planning perspective if any client approached me and said, ‘Should I look into breaking my mortgage?’ my answer would be yes.”
The financial crisis that began in 2007 with the breakdown of the US residential mortgage market still persists for millions of Americans who have lost their houses, their jobs and all hope of a secure retirement.
As a result, residential real estate prices in the hardest-hit areas such as California, Arizona, Nevada and Florida are well below replacement value (ie, the land is valued at zero), leading many analysts to conclude that prices must be near, if not already at, the bottom.
At the same time, the Canadian dollar remains very strong against the US dollar. Any investment in US assets is likely to provide a decent return over time based on foreign exchange gains alone.
Taken together, these facts seem to suggest that Canadians have a once-in-a-lifetime opportunity: To buy US real estate in desirable locations at historically low prices using cheap US dollars.
Seems like a slam dunk, right? Maybe. But there are a number of factors to consider before pulling out your cheque book and booking a flight.
Click here for more details from the Financial Post.
CMHC’s latest survey of Canada’s rental markets yields some surprising finds and some long-term winners.
Rental housing is a hot topic across Canada as house prices rise above what many people can afford, prompting first-time homebuyers to defer a purchase. Add in economic uncertainties, and both tenants and landlords want a property that makes the best use of their money.
For landlords, however, cash flow remains king. Some perennially tight markets, like Vancouver, have been in vogue with foreign investors who see good long-term potential in a market where new apartment blocks aren’t being built.
Many other markets in Canada are also seeing the purpose-built rental stock shrinking. (The total number of purpose-built rental units in Canada actually increased by 5,648 units last year, however.)
Click here to see Canada’s Top 50 Rental Markets from Canadian Real Estate Wealth.