Canadian Mortgage Housing News
The Canadian mortgage and housing sector has been growing and evolving with time. The reasons for this evolution are the changes taking place in the economic structure. Canadian news is filled with updates about what is happening in the mortgage and housing sector.
The past two years have seen some drastic changes made by the government. The Canadian Mortgage and Housing Corporation have been given new rules as guidelines to follow. This is an attempt to rectify some errors in the mortgage qualification standards. The measures taken had become quite necessary after the global economic turmoil.
The new mortgage rules in Canada have helped curtail the problems that were threatening the economic structure. These steps were taken at the right time but obviously will take time to adapt. The inflation and recession scare had led to major changes in the Canadian mortgage and housing industry. These were backed by the new guidelines for the CMHC. The Canadian mortgage trends have changed a bit since then and economists have come up with many theories and prediction in this regard.
The Canadian mortgage trends as seen today are a result of three basic factors. The first factor highlighted is the demographic changes in the country. This has led to a rise in demand of houses and in turn mortgages. The second factor has been highlighted as the new rules and regulations introduced by the government. The stricter rules have made qualification standards for mortgages a bit more stringent. The third factor is the economic trends that are being experienced globally. The European crisis has led to some problems for the Canadian economy but still the country has managed to maintain stability. Even the latest Canadian mortgage news is now presenting a brighter picture.
This was the year when the new mortgage rules in Canada were introduced by the government. These guidelines were to provide security for the Canadian Mortgage and Housing Corporation. People looking to buy houses had been taking advantage of the low mortgage rates in the country. The only major hurdle was the qualification standards that had to be met for mortgage loans. Even then the home buyers were taking up high-ratio mortgages which, were being insured by the CMHC.
As a result of the easier terms and conditions, people had taken up mortgages that were more than what they could afford. The fear for the government was the fact that this was creating pressure on the country’s economy. These were the basic reasons why the new mortgage rules in Canada were introduced. The Canadian mortgage news was reporting a dip in trends right after these changes and amendments. However, the picture that is being seen now suggests that the situation will soon get better for the sector.
The 2010 guidelines
The changes that were made to the rules and regulations for the Canadian mortgage and housing sector formed the basic guidelines for the CMHC. These guidelines were:
Firstly, all the individuals applying for the mortgage loans would have to qualify for the five year fixed mortgage. Even if they were applying for mortgage with shorter terms or lower interest rates, this would form the benchmark criteria.
Secondly, to lower the maximum withdrawal amount for refinancing mortgages. This will help ensure the safety of home owners and would be an effective way of saving. Thirdly, require a minimum down payment of 20% on all mortgages. These will have to be backed by government insurance. This way the government is not only protecting home owners but also the lenders.
The 2011 guidelines
In 2011 Canadian mortgage rules were revised further. These rules and regulations were built upon the same lines as those in 2010. The difference was that in 2011 the global economic turmoil was affecting Canada too. The fear of recession had caused unemployment. The Canadian mortgage and housing sector felt the effects of economic problems as well. There was a fall in demand for houses in the country. Prices started to fall and many people lost their homes in the process, the basic reason being that they could not afford the mortgage payments.
The guidelines that were introduced in 2011 were:
Firstly, reduce the amortization period to 30 years. The earlier 35 year amortizations would no longer be allowed. In essence this measure would reduce risk. The number of interest payments would be reduced and families would be able to take ownership of their homes quicker than before.
Secondly, to withdraw government backed insurance on public debt. The government would no longer insure the credit lines that are backed by homes. This gives the financial institutions something to think about as they are the ones who will have to manage the burden themselves now and not the tax-payers.
The News Now
The Canadian mortgage news since the beginning of this year has presented a somewhat positive picture. In contrast to popular belief the Canadian mortgage and housing sector is performing quite well. Economists had been predicting that this would be a year of slow growth for the housing and mortgage sector. The demand of houses would not be as high as it was in the past few years.
With the trends seen during the first month, predictions have changed. Now economists and analysts believe that this growth is not as sustainable as it looks and will be short-lived. Canadian mortgage trends will slow down after the first few months.
Canadian mortgage news is currently showing that the mortgage rates in the country have hit an all time low. Down to 3%, these rates have been explained in numerous aspects. One aspect being that this is a sign of falling demand. Because demand is no longer at the same level as it was earlier, the rates have come down as a result. The other aspect is that mortgage rates were low before the new mortgage rules were introduced. The economists believe in the theory of lower for longer. This implies that the new guidelines that have to be followed by CMHC will ensure the perfect safety measures for buyers and lenders. This way the rates can stay low because only those people who fall into the criteria will be qualified for mortgages. Those people who do not qualify will not be able to receive mortgages they cannot afford.