In a surprise move by the government today it has been announced by Finance Canada that effective October 15th, CMHC will no longer guarantee mortgages that are longer than 35 years. They also will now require a minimum downpayment of 5%.
There are a few immediate observations about this. One is that it will be harder for many individuals to qualify for a mortgage now as they may not have sufficient downpayment or monthly income for the shorter amortization. This will probably lower home prices as demand weakens. A second observation is this will cause many individuals to continue to rent instead of moving into home ownership, putting more pressure on rents due to increased demand.
Since this takes full effect in October it may create a small push over the next couple of months for people who are on the bubble of qualifying to hurry and buy. This may result in upward pressure on values and increased sales, but it should fall off quickly afterwards as the winter months are generally the slowest sales months anyway.
No word from some of the other mortgage insurerers about what their plans are yet. If you are planning on buying shortly, pressure is on, same with selling as we may see more drops short term due to this. On the positive side, the additional cash flow from increased rents is great and the long term outlook for values is still in the favour of the people holding long term.
The full article can be found here, Report on Business
