{"id":3589,"date":"2016-10-05T11:11:19","date_gmt":"2016-10-05T18:11:19","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=3589"},"modified":"2016-10-04T18:32:21","modified_gmt":"2016-10-05T01:32:21","slug":"ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2016\/10\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\/","title":{"rendered":"Ottawa\u2019s Move to Tighten Mortgage Market Will Squeeze Some Consumers Out"},"content":{"rendered":"<p style=\"text-align: justify;\">One of Canada\u2019s largest mortgage default insurers says about one third of its consumers would have problems meeting the new required debt service ratios unveiled by Ottawa Monday and could ultimately be forced into lower priced houses.<\/p>\n<p style=\"text-align: justify;\">The statement from Genworth MI Canada. Inc., the largest private insurer in the country, echoed sentiments from people in the industry worried that consumers will be so stretched under the new rules that even ones with existing mortgages \u2014 grandfathered from re-qualifying as long as they stay with the same lender \u2014 might be unable to shop around for better deals at renewal and end up forced into higher rates.<\/p>\n<p style=\"text-align: justify;\">Finance Minister Bill Morneau unveiled plans that would force all insured borrowers to qualify for loans based on the posted rate for a five-year rate mortgage, now 4.64%. Consumers with locked-in rates for five years or more have previously been able to use the rate on their contract \u2014 as low as 2.17%, according to ratehub.ca \u2014 and ultimately qualify for more loan. The rules also apply to low-ratio loans (those with a down payment of more than 20%), if those loans are put in a government-backed securitized program.<\/p>\n<p style=\"text-align: justify;\">\u201cThe big question is what happens with renewals,\u201d said Rob McLister, the founder of ratespy.com. \u201cWe\u2019re not sure if you have an existing loan whether you can port that to a new lender and not have to qualify at the new rate or does everybody who changes lenders have to qualify for the new rate.\u201d<\/p>\n<p style=\"text-align: justify;\">The rate qualification is not the only change. Other key measures that would affect all insured mortgages include a maximum amortization of 25 years, a maximum purchase price below $1 million, only owner-occupied properties being eligible and a total debt service ratio of 44 per cent at the time a loan is approved.<\/p>\n<p style=\"text-align: justify;\">New consumers unable to meet those requirements could be shut out of the market, but even consumers with existing mortgages might be unable to easily switch lenders, leaving them with little ability to negotiate and a higher real interest rate.<\/p>\n<p style=\"text-align: justify;\">McLister said non-bank lenders, which mostly securitize their loans with government backing, could see a steep reduction in business. The government said preliminary estimates are that eight per cent of buyers will be impacted, but McLister said lenders he\u2019s spoken to say it\u2019s likely closer to 40 per cent. Genworth stock finished down 8.7% Tuesday after it disclosed how its business would be impacted.<\/p>\n<p style=\"text-align: justify;\">Ottawa\u2019s move to tighten lending rules was coupled with new requirements to close loopholes it says some buyers were using to avoid paying capital gains tax on the sale of a principal residence, which is not available to non-residents. Beginning with 2016, individuals will have to report\u00a0 in their income tax return the sale of a property for which they claim the principal residence exemption.<\/p>\n<p style=\"text-align: justify;\">The move was believe to be largely aimed at reports of foreign buyers driving up prices in Vancouver, something that led the provincial government in British Columbia to begin imposing an additional 15% property transfer tax on foreign buyers in August.<\/p>\n<p style=\"text-align: justify;\">Some suggest a slowdown in sales in Vancouver can be tied to that provincial decision. The Real Estate Board of Greater Vancouver reported Tuesday that sales were down 32.6% in September from a year ago, 9.6% below the 10-year average for the month. Overall, prices were up 28.9% from a year ago but only 0.1% from August. In the detached home category, said to be a key target for wealthy foreign speculators, the average price actually climbed to $1.53 million last month from $1.47 million in August.<\/p>\n<p style=\"text-align: justify;\">Derek Holt, vice-president at Scotiabank Economics, said the new rules could mean foreign investors could be looking at 25 per recent reduction in their investments.<\/p>\n<p style=\"text-align: justify;\">\u201cThose Muskoka cottages bought by American families over the decades that \u2014 depending upon exactly when they were bought \u2014 are now almost entirely made up of capital gains just went sharply lower in after-tax terms if no advance cottage\/estate tax planning was done to mitigate the effects, and that\u2019s about revenues versus cooling what long ago happened in the property market,\u201d he said.<\/p>\n<p style=\"text-align: justify;\">But Kevyn Nightingale, an internal tax partner at MNP LLP, said the so-called tightening up a of the loophole is more about \u201cappearing to do something than actually doing something\u201d and will have little impact on the market.<\/p>\n<p style=\"text-align: justify;\">\u201cWhen you\u2019re a foreigner and you sell a piece of Canadian real estate, what goes into every purchase of sale document (is a statement) that says \u2018I hereby certify that I am not a non-resident of Canada for income tax purposes,&#8217;\u201d Nightingale said, adding that if the seller doesn\u2019t disclose that then the buyer must withhold 25% of payment and remit it to the Canada Revenue Agency. \u201cThis (new rule) is aimed at those Chinese investors in Vancouver. In some cases, it is out and out evasion where people lie on forms. What is more common is a (foreign resident) puts his family into a home into Vancouver and either loans or makes a gift to one of the family members to buy the property and they actually live here. It won\u2019t change this at all for that person.\u201d<\/p>\n<p style=\"text-align: justify;\">Paul Hickey, a tax partner at KPMG, said the new rules will create a rich database of everybody who sold their principal residence. There\u2019s a penalty for not disclosing it and a forfeiture of the tax break if it\u2019s later found out you didn\u2019t reveal a sale.<\/p>\n<p style=\"text-align: justify;\">\u201cThey\u2019ll be able to do some matching and say \u2018you\u2019re a contractor, you\u2019re a real estate agent,\u2019 \u201d he said. \u201cThey are going to be able to mine that data. If you buy and sell three houses in three years, that\u2019s going to show you are very active.\u201d<\/p>\n<p><a href=\"http:\/\/business.financialpost.com\/personal-finance\/mortgages-real-estate\/ottawas-moves-to-tighten-mortgage-market-will-squeeze-some-consumers-out\" target=\"_blank\">Ottawa\u2019s Move to Tighten Mortgage Market Will Squeeze Some Consumers Out<\/a> by Garry Marr | Financial Post<\/p>\n","protected":false},"excerpt":{"rendered":"<p>One of Canada\u2019s largest mortgage default insurers says about one third of its consumers would have problems meeting the new required debt service ratios unveiled by Ottawa Monday and could &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2016\/10\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-3589","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Ottawa\u2019s Move to Tighten Mortgage Market Will Squeeze Some Consumers Out &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2016\/10\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Ottawa\u2019s Move to Tighten Mortgage Market Will Squeeze Some Consumers Out &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"One of Canada\u2019s largest mortgage default insurers says about one third of its consumers would have problems meeting the new required debt service ratios unveiled by Ottawa Monday and could &hellip; [read more]\" \/>\n<meta name=\"twitter:creator\" content=\"@RoryClipsham\" \/>\n<meta name=\"twitter:site\" content=\"@RoryClipsham\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rory Clipsham\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2016\\\/10\\\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2016\\\/10\\\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\\\/\"},\"author\":{\"name\":\"Rory Clipsham\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\"},\"headline\":\"Ottawa\u2019s Move to Tighten Mortgage Market Will Squeeze Some Consumers Out\",\"datePublished\":\"2016-10-05T18:11:19+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2016\\\/10\\\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\\\/\"},\"wordCount\":985,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/#\\\/schema\\\/person\\\/0672b9777e67473b9bd9247df49499c7\"},\"articleSection\":[\"Market Updates\"],\"inLanguage\":\"en-CA\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2016\\\/10\\\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2016\\\/10\\\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\\\/\",\"url\":\"https:\\\/\\\/www.roryc.ca\\\/blog\\\/2016\\\/10\\\/ottawas-move-to-tighten-mortgage-market-will-squeeze-some-consumers-out\\\/\",\"name\":\"Ottawa\u2019s Move to Tighten Mortgage Market Will Squeeze Some Consumers Out &#8226; 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