Interest rates up and less choice for borrowers but let's keep things in perspective

Yesterday, December 1st, 2016 a bunch of new mortgage rules come into effect thanks to the Department of Finance and their tinkering of mortgage insurance. Yes, because of this rates have gone up and there is less choice and less competitiveness in the market place. As noted by the author in an article by Canadian Mortgage Trends called Ottawa's Gift to Lenders: Some Numbers, the review of these new rules and their affects on mortgage lenders and borrowers is a negative one. I have mixed feelings over this; first of all let's keep the rate increases in perspective; they've gone up from around 2.39% - 2.59% to 2.59% - 2.79% for most 5 year fixed rates. There are some better rates for people who have less than 20% down payment which does seem ludicrous; they should be the same. But some mortgage lenders have stopped offering conventional financing with 30 year amortisations resulting in less choice.
If interested, take a read of the article below for a deeper look into the numbers and the author's opinions.
As always, if you have any questions with regards to all these changes, please don't hesitate to give me a call or e-mail me anytime.

Ottawa’s Gift to Lenders: Some Numbers

 November 30, 2016   Robert McLister  


Happily, it’s only taken six hours to update 183 rates and 25 lenders’ policies following today’s default insurance rule changes. I reckon I’ll be done combing through the rate sheets and policy updates by the weekend, just in time to question the grey matter of those responsible for this absurdity.

Here’s some of the results so far of the DoF’s mortgage insurance ban. These numbers are not exhaustive. They’re just from the banks, monolines and credit unions this author commonly uses:

- Typical new rate surcharge on refinances: 15 bps

- Number of broker lenders who have terminated prime refinances altogether: 6

- Typical new rate surcharge on amortizations over 25 years: 10 bps

- Number of lenders who have terminated amortizations over 25 years altogether: 7

- Typical new rate surcharge on single-unit rentals: 15-25 bps

- Number of lenders who have terminated rentals altogether: 6

- Typical new rate surcharge on properties over $1 million: 15-25 bps

- Number of lenders who have terminated lending on $1 million+ properties altogether: 5


Some of the lenders who pulled the plug on these products will be back in the game once they’ve arranged new funding. But they’ll be tacking on meaningful rate premiums, like almost every other lender.

But there’s more:

- Number of lenders who raised all their rates in the last week (and no, not because of bond yields), instead of just raising refi, long-amortization, rental and $1 million+ rates: 4

- Number of lenders with better rates on higher-defaulting low-equity insured mortgages than lower-defaulting   20%+ equity conventional mortgages: 18

- Number of borrowers with 20%+ equity who default on their mortgages: Less than 1 in 300

- Canadian taxpayer losses from a U.S.-style housing catastrophe: $0

- (Insurers’ capital would be drawn down ~$9 billion, says Moody’s. But that’s a fraction of their combined overall   capital base, so a taxpayer bailout would be extraordinarily improbable.)

And that brings us to the most upsetting stat of all:


- Estimated number of mortgagors who will unjustifiably get their pockets picked by those behind this, one of the

  most costly, reckless, ill-planned, non-consultative series of policy decisions in Canadian mortgage history: At    

  least 6 million (half of current borrowers)…and more to come. 



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