After many of Canada’s leading financial experts and analysts called for Finance Minister to make it even tougher to get a Toronto mortgage, Mr. Flaherty came right back at them and told them to do their own jobs. Since it was mostly bank execs that were asking him to tighten mortgage rules, Flaherty said it was “rather odd” that the banks wanted him to tell them how to run their business; and that essentially, if they wanted to make it tougher for people to get a mortgage, they’d have to do something about it themselves. Still, the banks waited anxiously to hear what new mortgage rules would be included with the March 28 budget. And just like Flaherty promised, there were none. Now, it is time for the banks to do something about those tougher mortgages on their own, and one bank already has. That bank is First National, who are no longer offering 35-year amortization periods on their mortgage products.
The bank, which is the seventh biggest lender of mortgages in Canada, and the second-largest lender to deal with Toronto mortgage brokers, has given two reasons for withdrawing these offers from the table. Mostly though, the bank says that the customers were the real reason for the switch. In a statement released along with the announcement a First National spokesperson said, “The 35-year conventional product had certain restrictions that created confusion. Based on that and demand, we decided to streamline our offering.”
First National also isn’t the only bank thinking about making this move. Other lenders have also said that the limits now placed on mortgage insurance by CMHC and the higher cost of just having these mortgage products are other reasons why 35-year amortizations might be becoming a thing of the past.
However, one lender also wanted to stress that it wasn’t due to defaults that these amortization periods would start to become a rarity, as “defaults on conventional mortgages are only marginally higher with longer amortizations. Risk is more correlated with factors like repayment history, equity, and employment.”
It’s important to note that the longer amortization periods are only being taken off of First National’s table for conventional mortgages; so those that need another type of mortgage may still qualify for them. It is as of today that the First National will no longer be offering the 35-year amortization products. And, it may be that this is just the beginning. Other banks, especially the Big 6, may soon start to follow suit, take Flaherty’s advice, and start to make moves of their own to make it harder to get a mortgage.
