24 Jan

How Do the New Mortgage Rules Affect Your Buying Power?


Posted by: Michael Hallett

Implications of the New Mortgages Rules

On January 17, 2011 Finance Minister Jim Flaherty announced that there would be some changes to the mortgage guidelines, these changes will take place on March 18, 2011. The one rule change that will affect homebuyers will see Ottawa stop backing home loans greater than 30 years if there down payment is less than 20%. Here is how the numbers play out for a single person buyer, possibly a first time homebuyer!

Income: $45,000 (Canadian average)

Debt: $3,000

Monthly Expenses: strata $200, heat $50 and property taxes $210

Down payment: 5%

Interest rate: 3.89% 5 year fixed

Amortization: 30 year

With a 5% down payment of $7,900 this person could look at purchasing a property for $158,000. Before March 18th the buyer could look at qualifying for a mortgage using a 35 year amortization. Using the maximum amortization schedule this buyer could increase their purchasing power by $22,000. If you are serious about buying, now is the time to do it.


24 Jan

Meeting with Finance Minister Jim Flaherty


Posted by: Michael Hallett

Finance Minister Listens Carefully to Mortgage Brokering Industry Concerns!

Last week the President of Dominion Lending Centres was invited to the 2011 Pre-Budget Consultation chaired by Finance Minister Jim Flaherty in Regina. Participants included 17 hand-picked Canadians representing a leadership position in their respective industries. The day consisted of:

  • An overview by Minister Flaherty of Canada’s past performance and outlook for 2011 and beyond
  • A break-out discussion into four groups to solicit ideas and suggestions on cost-neutral or non-spending steps the government can take in the next Federal Budget to help create jobs and promote economic growth
  • Feedback on whether the government is on track for a balanced budget by 2015-2016, or if this too ambitious or unrealistic
  • Suggestions on ways that the federal government can be more efficient and effective
  • Suggestions on what Canadians’ priorities should be for the short and long term to encourage private sector growth, and leadership in the economy

A plenary session followed with Minister Flaherty and the finance department. Each participant spoke about their specific industry, and provided feedback and discussion. There was also a Federal Finance Briefing on Canada’s Recent Economic Performance presented by Deputy Minister Michael Horgan.


With strong policy support, an economic recovery is continuing.

Economic activity in Canada is back to pre-recession levels (the best performance in the G7).

Canada’s solid economic recovery has supported a recovery in the labour market (since July 2009, employment has increased by more than 460,000 jobs, more than offsetting all of the jobs lost during the recession).

Real GDP Growth is expected to remain moderate in the near term.

Canada is expected to have the strongest average growth in the G7 over 2010 and 2011 (IMF Forecast).

The Global recovery is expected to be modest led by emerging economies, particularly Asia.

Canada has had the highest growth in real income Per Capita for G7 countries (1999-2009).

Although we have many positives, Global recovery remains fragile.

Risks to the Global Outlook

Uncertain strength of private demand in advanced economies, particularly in the US.

High sovereign debt levels in some European Countries.

Global imbalances and implications for the Canadian Dollar.

Fiscal Situation and Outlook

Canada is on track to return to a balanced budget by 2015-2016 (current federal deficit is $55 billion.

Position on Behalf of the Mortgage Industry & Dominion Lending Centres I articulated our views to the Minister privately, at the roundtable discussions, and then wrapped up with a very passionate overview of our industry’s perspective to the entire group. This created great discussion, feedback and support from many other participants including questions and dialogue from Minister Flaherty.   My main points included:

  • Our industry is sincerely grateful, and the Minister’s office along with Bank of Canada’s Governor Mark Carney should be congratulated on their swift prudent actions, including emergency mortgage pricing, when the global debt crisis began. Their actions were significant in helping Canadians avoid the housing collapse that our US neighbours experienced.
  • Although we support and encourage household fiscal responsibility, we think a sweeping policy change like the one we saw earlier this week wasn’t necessary. Mortgage default in Canada is the lowest in the world. Rather than pairing back the amortization term from 35 to 30 years, they should have made the borrower qualify based on payments for a 30-year amortization and kept the maximum amortization at 35. Qualification and purchasing power just dropped significantly, especially affecting first-time homebuyers, making it more difficult for our most valuable assets, young adults and young families, to experience homeownership and participate in our real estate sector.
  • I spoke about the changes regarding refinancing up to 85% loan to value. One of the most effective ways that we as mortgage professionals can eliminate high-interest, unsecured consumer debt and over extension is to retire this debt by refinancing at today’s low interest rates, sometimes saving the consumer hundreds of dollars per month in throw away interest. This policy is going to force many homeowners who are experiencing job loss, illness, separation, divorce or urgent unforeseen family crisis into having to sell their homes to gain access to their very own equity. Just under two years ago, we could refinance up to 95%. On a $300,000 home, that’s a difference of $30,000 homeowners can no longer access. Having access to that money could be the difference between getting through the tough times or spiralling into much more dire straits, including having to quickly sell their home at a discount, and finding themselves in a much more serious situation.
  • I spoke about the unlevel playing field between our Canadian insurers, specifically about the unlevel playing field enjoyed by CMHC. We discussed the need for the government to support our insurers equally. This benefits the consumer, and supports consumer choice and fair play.
  • My most passionate plea was for the government to have a very hard look at unsecured debt and specifically the credit card issuers. Canadians’ biggest financial struggles, their over extension and record debt levels are not due to their mortgages (again, we have the lowest mortgage default in the world). They are due to easy access to high-interest credit cards and other unsecured debt. How is it that my very own son, who is 19, attends second-year University, does not have a job and was issued two separate credit cards on his own? One of them had an initial credit limit of $500 and is now at $3,500 in just over a year. The feedback from all the participants in the consultation was remarkable. Several very high-profile participants expressed similar stories and recognized this as a very serious pressing issue for Canadians. I explained that we have very strict qualifications for mortgages, including TDS and GDS ratios to ensure that consumers have the financial wherewithal to make the payments, and similar qualifications based on the credit card limits should apply. The Minister took notes, asked for suggestions on how to implement and recognized it as a more important issue than he had initially considered. We did have discussions and I commended them on taking the first step, and a very valuable one at that, by putting the length required to pay off your credit card based on making the minimum payments.

The day was incredibly interesting, and I truly felt that these sessions were much more than a ceremonial photo opportunity, and that the Minister’s office was truly listening and valued the panel’s feedback. I will continue to stand up for what I believe in and speak for what is right, not what is popular, politically correct or the easiest point of view. Our industry is under assault, and Canadians are the ones who are most affected. We need to bind together, regardless of our companies or our competitors, and speak with a common voice and stand up so that we can continue delivering choice, value, options and trusted advice to Canadians.