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The latest round of mortgage rule changes kicked in last week and lenders wasted no time in adjusting their product offerings, in some cases by adding new rate premiums and in others by pulling products altogether.
While these changes were not welcomed by borrowers, or by many people who work in mortgage-related fields, our policy makers got exactly the result they were looking for. They had become increasingly concerned that an extended period of ultra-low mortgage rates was fueling an unsustainable rise in house prices in hot regional markets and was exacerbating our average household debt levels, which today stand at record levels.
Ideally, our mortgage rates would have risen naturally, but aside from the short-term post-U.S. election spike that pushed them a little higher, that just hasn’t happened. And since market forces weren’t going to materially raise mortgage rates on their own, our policy makers decided to implement another round of mortgage rule changes to make them rise, this time by limiting the availability of government default-insurance on specific mortgage products. (Bluntly put, it was either that or close your eyes, cross your fingers and hope for the best – an approach that too many of my colleagues continue to espouse.)
Now that the latest changes have been implemented, here are the answers to five key questions to help borrowers understand how the residential Canadian mortgage landscape has now changed.
- Are there any mortgage products that are no longer available?
No. Mortgages are still available to affected borrowers like refinancers, rental property investors, purchasers of high-value properties and those looking for extended amortizations. That said, these products are less widely available and are now being offered with new rate premiums added. For example, borrowers who want to refinance should now expect to see an additional premium of .10% to .15% added to their base rate, and single-unit rental property investors will now typically pay an additional rate premium of 0.25%.