Last week CMHC came out with some pretty impressive stats regarding defaulted mortgages and the organization’s profits for the quarter. But while the company focused on these stats in their release, there was another one – that was quite shocking – that they didn’t bring to light. That’s the fact that the mortgage rules that were put into place last summer virtually eliminated the refinancing market; and that home refinances are down by 81 per cent.
“Purchase volumes increased approximately 11 per cent while refinance volumes were approximately 81 per cent lower compared to the same period in 2012,” says CMHC’s last quarterly report. “The latest mortgage insurance parameter changes that took effect in July 2012 effectively eliminated refinancing at loan-to-value over 80 per cent.”
And it’s not something that’s gone unnoticed by the brokers.
“It is impacting our business,” says Bob Smith, broker and owner at Verico K-W Mortgage. “From what we see, in this area anyways, it has been at least 80 per cent lower. We don’t have a full 12-month period to gauge it yet, but it’s had a real impact.”
And he says, it’s not an impact that’s been positive. In fact, it’s hurt homeowners that need to borrow more than 80 per cent.
“The rule is designed to correct some of the habits people have fallen into in the past few years such as refinancing every few years and chewing up the equity,” says Smith. “Unfortunately, it squeezes out legitimate cases, such as those who need to consolidate due to losing a job or disability. The rule was too hard and fast with no exceptions.”
And some say that the restriction has even put some homeowners out of their homes.
“What people were doing was getting themselves out of trouble by refinancing,” says Mark Nelson of Dominion Lending Centres. “I had a client who had to put renovations on credit cards because they couldn’t refinance and they eventually lost his house. It has hurt a lot of hardworking people.”
Many people said when the tight restrictions were first put in place that it would take some time before we saw the full impact and consequences from them. If you were to ask these brokers, they’d likely tell you that time is up, and that the results are not good.
