Ottawa’s Gift to Lenders: Some Numbers
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.