The federal government changed the rules Thursday (June21) to make it tougher for people with limited means to buy homes or borrow on ones they already have.
Joel Ives says changes to Canada Mortgage and Housing Corporation rules that cut the maximum term of insured mortgages to 25 years from the current 30 shouldn’t pose much of an obstacle to Islanders.
“What we’ve noticed with a lot of people that many people were sticking around that 25-year amortization (period) anyway,’’ Ives said.
“We also have a mortgage company, too, and most of the time we really weren’t pushing people or recommending 30 (years) because it just wasn’t cost prohibitive here.’’
The new rules will also end insurance for homes which cost more than $1 million. Again, not much of a market will be affected on P.E.I.
The move comes amidst overheated markets in major centres like Vancouver and Toronto were prices are a heck of a lot higher than they are in this part of the country. Good luck finding anything in Vancouver cheaper than $800,000. In those markets, people were stretching things out just to make it affordable.
“You’re almost buying a house at 30 years (amortization) just to buy a house. I don’t see it as having a huge effect on the purchase side of things here.’’
Ives said even as recent as a few years ago when the maximum was 25 years, the local market didn’t see that many people going to 20 years.
“That was kind of the standard. If you could do 20 (years) you were doing good. You were a little more frugal. Twenty-five is still fairly safe so I don’t see (the new rules) as being a killer.’’
The new rules will also limit refinancing loans to 80 per cent of the value of a home, down from the current 85 per cent.
Ives said the federal finance minister is trying to slow the accumulation of debt in Canadian households which, according to The Canadian Press, reached a record 152 per cent of income in the fourth quarter of last year.
“The minister (wants to) put a little bit more cash back in their house, more than before which, in some ways, is good for the economy but it depends on how you look at it.’’
A homeowner who wants to refinance his or her home because they have renovations planned, that’s good because it puts money back into the economy. That homeowner is hiring trades people.
It’s the fourth time Ottawa has tightened mortgage rules since 2008.