{"id":5978,"date":"2017-05-27T11:11:36","date_gmt":"2017-05-27T18:11:36","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=5978"},"modified":"2017-05-27T12:25:09","modified_gmt":"2017-05-27T19:25:09","slug":"vancouvers-real-estate-market-claims-the-quality-of-mortgages-is-declining","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2017\/05\/vancouvers-real-estate-market-claims-the-quality-of-mortgages-is-declining\/","title":{"rendered":"Vancouver\u2019s Real Estate Market Claims The Quality of Mortgages Is Declining"},"content":{"rendered":"<p style=\"text-align: justify;\">&#8220;Vancouver mortgages are rapidly deteriorating in quality,&#8221; one recent report claims. That\u2019s just not the case, according to one leading broker who operates in that market.<\/p>\n<p style=\"text-align: justify;\">A recent Better Dwelling article about Vancouver\u2019s real estate market claims the quality of mortgages in that city is declining.<\/p>\n<p style=\"text-align: justify;\">\u201cHigh-ratio mortgages combined with high loan-to-income ratios are a dangerous combination for homeowners,\u201d the article claims. \u201cA high-ratio mortgage is one where less than 20% is placed as a down payment, and the owner has as little as 5% equity in the home. Chances of these mortgages going underwater (i.e. the owner ending up with negative equity in the home) are already pretty high.<\/p>\n<p style=\"text-align: justify;\">&#8220;This becomes even more of an issue when paired with a high loan-to-income ratio.\u201d<\/p>\n<p style=\"text-align: justify;\">The article argues rising rates would make it impossible for many buyers to afford their mortgage payments.<\/p>\n<p style=\"text-align: justify;\">According to Dustan Woodhouse, though, a potential increase in rates has already been accounted for with last year\u2019s mortgage rule changes.<\/p>\n<p style=\"text-align: justify;\">\u201cA high ratio buyer enters with a 4.64% stress test interest rate. They are already prequalified at interest rates more than 2% above today\u2019s rates. On today\u2019s income they are stress tested at much higher rates at their current income,\u201d he argued. \u201cBy the time we actually get to a 4.64% interest rate, the overwhelming majority of those buyers will have seen their income increase as well. But their income doesn\u2019t even need to increase to debt service a 4.64% interest rate because they\u2019re prequalified.\u201d<\/p>\n<p style=\"text-align: justify;\">But the article plugs on.<\/p>\n<p style=\"text-align: justify;\">It cites Bank of Canada and Ministry of Finance data that shows the quality of high ratio loans in Vancouver is deteriorating.<\/p>\n<p style=\"text-align: justify;\">\u201cThe fiscal year ending in 3Q of 2016 saw high-ratio mortgages with an average LTI higher than 350%, in more than 75% of postal codes in Vancouver,\u201d it claimes. \u201cThis is an 11% increase from the period prior, which is very strong growth. Unfortunately, this isn\u2019t the good kind of growth.\u201d<\/p>\n<p style=\"text-align: justify;\">Woodhouse tackles this argument with a bit of math.<\/p>\n<p style=\"text-align: justify;\">\u201cUse an example of a $100,000 income and a $2000 a month mortgage payment. That\u2019s a 500% loan-to-income ratio,\u201d he said. \u201cDo you really think someone making $100,000 a year with a $2000 payment is in danger?\u201d<\/p>\n<p style=\"text-align: justify;\">Use the numbers Better Dwelling does, though, and the situation appears even less dire.<\/p>\n<p style=\"text-align: justify;\">\u201cAt a 350% loan-to-income ratio, a homebuyer earning $100,000 can purchase a $350,000 home with a high ratio mortgage and have payments of $1,575 per month,\u201d Woodhouse said.<\/p>\n<p><a href=\"http:\/\/www.canadianrealestatemagazine.ca\/news\/broker-analyzes-the-latest-controversial-assessment-of-the-real-estate-market-225870.aspx\" target=\"_blank\" rel=\"noopener noreferrer\">Broker Analyzes The Latest Controversial Assessment of The Real Estate Market<\/a> by Justin da Rosa | Canadian Real Estate Wealth<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Vancouver mortgages are rapidly deteriorating in quality,&#8221; one recent report claims. That\u2019s just not the case, according to one leading broker who operates in that market. A recent Better Dwelling &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2017\/05\/vancouvers-real-estate-market-claims-the-quality-of-mortgages-is-declining\/\">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":[9],"tags":[],"class_list":["post-5978","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Vancouver\u2019s Real Estate Market Claims The Quality of Mortgages Is Declining &#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\/2017\/05\/vancouvers-real-estate-market-claims-the-quality-of-mortgages-is-declining\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Vancouver\u2019s Real Estate Market Claims The Quality of Mortgages Is Declining &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"&#8220;Vancouver mortgages are rapidly deteriorating in quality,&#8221; one recent report claims. 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