Monday, May 13, 2013

OFSI confirms it's considering mortgage amortization changes

On Thursday we asked "Are 30 and 35 year mortgages about to be banned in Canada?", a question triggered by Garth Turner's reported inside information that federal Finance Minister Flaherty was about to implement this significant change.

The speculation has triggered a firestorm of interest in the real estate community.

And now comes confirmation that the Office of the Superintendent of Financial Institutions Canada (OSFI) is indeed looking at the issue of limiting amortizations to 25 years on conventional mortgages (those with 20%+ equity).

Canadian Mortgage Trends has verified this with the OFSI.
A spokesperson from Canada’s banking regulator, The Office of the Superintendent of Financial Institutions Canada (OSFI), verified that it is looking at the issue of limiting amortizations to 25 years on conventional mortgages (those with 20%+ equity). Currently, those “low-ratio” mortgages can have amortizations up to 35 years.

OSFI is “doing some preliminary consultation with financial institutions” on the matter, said the spokesperson.

Those communications appear to be behind the scenes with banks and federally-regulated trust companies. OSFI will not be issuing a public statement in the very near term (i.e., next week).

The regulator added, “We are working to determine the desirability of some changes given current conditions in housing markets and recent trends in household indebtedness.”

“A decision in that regard would be taken once we hear back from the industry. Any proposed changes to our mortgage guideline that may result from this work would be subject to a public consultation process.”

Officials from OSFI, the Department of Finance (DoF) and the Bank of Canada have been working together closely. Their aim is to stabilize housing, moderate debt levels and reduce economic exposure to rising rates.

When implementing the last set of mortgage changes in 2012, Finance Minister Flaherty made it crystal clear that he considers it “desirable” to make home buying more difficult.

In December, he told reporters: “Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust. So I'm all for a soft landing.”

But real estate has been more resilient than many expected. And some at the DoF are not satisfied that housing is slowing fast enough.
Presumably we will now see the real estate industry go into hyper-lobby mode to mitigate the changes as much as possible.


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  1. Why all the obfuscation and redirect. Or as we small people call it - lying. The banks are already preparing and have received correspondence at the manager level to prepare......

    Get on with it already, IMHO......



  3. As long as interest-only HELOCs are allowed this all counts as just talk and no action. Mortgage brokers are well aware of how to arrange bridge financing to get someone approved, then switch to an interest-only HELOC for the bulk of the mortgage amount.
    BTW, I saw a big sign for Cornerstone in Langley while driving to a clien today; "Own for only $491 per month." That is, of course, yet another of the "mortgage subsidy" programs, the developer pays a portion of your mortgage for a year or two. In essence precisely the same as a teaser rate mortgage, the absence of which is often trotted out as one of the reasons why Canada is different and not a bubble.

  4. good sales day yesterday.

    1. Monday's sales weren't even half of the number of new listings. But sales weren't under 100, so I guess any ray of sunshine helps.