Canada’s mortgage brokers are warning the banking regulator that its proposed mortgage underwriting rules could result in people losing their homes.
The brokers are concerned about a number of the potential rules, but the one that worries them most outlines what banks would have to do when a consumer wants to renew or refinance their mortgage.
The proposed rules suggest that banks recheck areas such as employment status, current income and the current value of the home for renewals and refinancing.
“This would be a significant, significant change,” says Jim Murphy, the head of the Canadian Association of Accredited Mortgage Professionals (CAAMP).
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An influential international body is urging Canada’s central bank to raise interest rates in the fall, and continue doing so through 2013 to cool housing prices and contain inflation.
The Paris-based Organization for Economic Co-operation and Development’s prescription for monetary policy will stoke the already hot debate about whether the Bank of Canada’s interest rate stance is inflating a housing bubble.
Governor Mark Carney and other officials say the days of ultra-cheap money are coming to an end, although they so far have declined to be more specific. The OECD, a high-powered economic research group backed by contributions from its 34 rich country members, offers a scenario: An increase in the benchmark rate of a quarter of a percentage point in the autumn, and similar increases each quarter through to the end of next year, leaving the benchmark overnight target at 2.25%.
That still would be low by historical standards, yet, according to the OECD, likely a big enough increase to cause prospective homeowners to think twice before buying at current inflated prices. But the OECD’s recommendation comes with a risk.
Fortunately, most folks don’t need a souped-up mortgage. They just need the right combination of options at a low rate.
In the quest for cost savings, things like refinance flexibility and prepayment privileges are often sacrificed for a cheaper rate. This is especially common when people can’t quantify how much a mortgage feature could save them.
But mathematically speaking, it is possible to estimate the benefit of mortgage flexibility. You can then decide if it’s worth paying for. It just takes some reasonable assumptions and a bit of light math.
In that spirit, the Globe and Mail offers some general estimates of what different mortgage features are “worth” – how much extra a “typical” borrower should be willing to pay for a feature, in the form of a higher interest rate.
By any measure – health, education, housing or income – Canadians are far better off than residents of the developing world.
But they’re also better off than many of the planet’s richest countries, according to the Organization for Economic Co-operation and Development’s latest quality-of-life assessment, released yesterday.
In a comparison of 11 wellbeing indicators in 36 countries, Canada placed sixth, behind top-ranking Australia and third-place US. Norway, Sweden and Denmark also finished ahead of Canada. (The country ranked second in 2011, but the OECD’s Better Life Index has changed slightly since its inaugural year.)
The OECD’s thinking on wellbeing has been evolving. Better known for its emphasis on countries’ gross domestic product, income and employment rates, the Paris-based organization began nearly a decade ago creating a quality-of-life barometer that would take a broader look at what makes people healthy and happy. It quickly found out that money isn’t everything, noted Anthony Gooch, the organization’s Director of Public Affairs and Communication.