The new mortgage rules are coming April 19th and the industry is a buzz about the changes and how they will affect business. Let's look at the changes:
1) refinances to 90% max - if we are to assume that there is a possible housing bubble, then this change is not a bad thing. It will keep the folks who are financing their lifestyle with the equity in their homes from continuing to rack up credit and refinance it to the detriment of the equity in their homes.
2) using the 5 year rate to qualify Variable Rate Mortgages - again, not a bad thing. Prime rate is expected to rise this year, that is almost guaranteed. If clients are not prepared for this, we will see lots of foreclosures. This is good protection for clients. The question remains, will it be discounted or posted rates used in the qualification calculation?
3) rentals, max 80% LTV - this is the most questionable of the three changes. There is lots of debate on this one. This may go too far, but, once again, if we are assuming that there is a housing bubble in Canada, the last thing we need is speculation on rental properties driving that bubble to burst.
Only time will tell if these changes will do what they are intended to do. And of course, hindsight will be 20/20!
