ResMor Trust did a survey of 1,000 Canadian across the country 18 years of age or older, to gauge their thoughts on the new mortgage lending rulesannounced by the government a few weeks ago.

The main points include:

Regional differences

Taking a look at these results, if 23% disagree that obviously means that 77% do agree with the changes which seems quite high. This means that over 3/4 of those surveyed believed that the government shouldn’t be insuring the higher risk mortgages of those who don’t have at least a 5% deposit or choose to amortize the loan over 40 years.

This may be true in regards to the 40 year amortizations as in our talks with a few mortgage brokers it seems that many mortgage shoppers could manage payments with a shorter term such as 25 years, however, opt for the 40 year plan for added flexibility and then just make additional prepayments on the loan.

The reason’s behind people agreeing that a 5% deposit should be necessary to purchase a house in Canada is less apparent. Financial prudence? Conservatism?

I’d be interested to see if anybody has any stats on the default rate of 0% deposit or 100% mortgage holders vs people who put down 5% deposits. If anyone has these please let me know.

Kelvin

Interesting article on Bloomberg about the private mortgage insurers such as AIG and PMI and how they’re considering what to do in the wake of the government’s decision to stop insuring 40 year and 0% deposit mortgages.

The report highlights some interesting stats on the popularity of the longer mortgages since their introduction in 2006:

The new rules come into effect on October 15, 2008, however, lenders could continue to offer 40-year loans and zero percent down mortgages under the new rules, though they wouldn’t get financial guarantees from the government, said CAAMP.

According to a report by Canoe the Canadian Finance Minister Jim Flaherty has said their are no housing worries in Canada and the government isn’t worried about a subprime housing bubble as we’re seeing in the US.

At an event in Calgary he said:

He also said that despite the government tightening rules on mortgage lending with their announcement last week to stop insuring 40 year and 0% deposit mortgages, the general health of Canadian banks are very good.

The Canadian government announced last week that they will stop guaranteeing 40 year and 100% mortgages through the Canadian House and Mortgage Corporation (CHMC) effective October 15th, 2008.

The announcement stated:

The Government of Canada today announced adjustments to the rules for government guaranteed mortgages aimed at protecting and strengthening the Canadian housing market. The new measures include:

Interestingly, the Financial Post reported some banks, including the Bank of Montreal and CIBC have quickly responded by removing the 40 year amortization mortgage from the market, while CIBC also now requires a minimum 5% downpayment.

Other banks to follow have included online bank ING Direct Canada, while Toronto-Dominion Bank said it is reviewing its mortgage offering, and Royal Bank of Canada and Bank of Nova Scotia, are expected to follow as well.

As a result of these changes, many people are expecting that there will be a huge rise in house sales as home buyers who don’t have a 5% deposit or need the longer amortization period in order to afford a house in high price areas such as Toronto, Calgary and Vancouver will be rushing to make their purchase before the October deadline. This would indicate a busy period for the next 3 months and then we’re most likely to see a drop off in the market as lenders, brokers and buyers adjust.

Kelvin