We have been paying close attention to the potential of policy changes by the Office of the Superintended of Financial Institutions (OFSI). In some shape or form, essentially all major mortgage lenders in Canada report to OFSI directly, or indirectly. OFSI issued new draft criteria last week relating to how much money federally regulated mortgage insurers have to leave in reserve to back their mortgage portfolios.The regulator is bringing in the new rules in an attempt to address riskier elements of Canada's mortgage market. The most obvious markets for potential risk are Vancouver and Toronto, with Calgary and Edmonton on the short list as well. These changes which take effect January 1st incorporate new drivers of risk, including creditworthiness of the borrowers, the remaining amortization period, and outstanding loan balance. Directly these changes will impact the government owned Canada Mortgage and Housing Corporation (CMHC), and publicly traded Genworth Canada, and Canada Guaranty. Indirectly, all files that are insured against default, which is every loan with less than 20% downpayment, and often (silently in the background) mortgages with even larger down payments will affected by this change.
What this could mean for homebuyers?
Added capital requirements that are not making money means lost revenue and additional costs. These costs will more than likely trickle down to the consumer. There's two potential avenues for this. More than likely we will see a small increase in mortgage insurance premiums. A second potential effect will be an increase in mortgage rates themselves which are a real cost if any additional underwriting costs come from this movement.
Will this cool these 2 hot markets?
In our opinion, probably not. Using Vancouver as an example, many of the purchases were being made by foreign ownership with well over 20% down. A small bump in say rate premiums for a first time buyer with 5% down is going to hurt that potential buyer to a much larger degree, but we don't see how this regulations change can slow down a market as a standalone policy. The recent tax of purchases by foreign ownership in the Vancouver area has had a much quicker, and substantial impact of their market.
What it could mean for mortgage insurers and lenders?
It's too early to tell. Genworth has commented that they are already compliant with the new policies being implemented. It's been our experience, that generally these types of announcements are more optics than anything. More than not, our lender and insurance partners are already practicing more prudent lending policies than the government is mandating.OFSI has said it wants to ensure mortgage insurers are in a better position to "withstand severe, but plausible losses" stemming from their businesses. Is that an overreaction because of two over-heated markets, or visionary governance? Stay tuned to see how this all play out in our very regionalized real estate markets across Canada.
We had our annual softball tournament at the beginning of September. Our whole team of mortgage brokers and lenders joined us for a chance to win the notorious QMS silver cup. Paul Bojakli’s team won yet again! Check out the rest of our fun pictures on YouTube!
September is almost over, it’s getting a colder, and it’s time, not only to change your wardrobe, but your home decor as well! So what’s in this year besides the colour grey? It’s the Natural & Neutral. Real fibres, materials, and earthy tones. Just because it’s getting darker outside doesn’t necessarily mean that your home decor should. White is still in style after labour day believe it or not. Paint your decorative jars white, your benches white, your wreaths white, and even your pumpkins white white this year! And you can leave the the darker richer colours for that pop of colour. All of your home decor cannot be all white of course.
Since this year’s fall colour is white and Halloween is coming up, we also wanted to make this month’s newsletter about decorating white pumpkins! Here are some fun and decorative white pumpkins to inspire you for the season as well as for this coming halloween.