Everyone has been so busy talking about the changes to Canadian mortgages that Finance Minister Jim Flaherty announced last Thursday that other new rules have gone almost unnoticed. However, on the same day Flaherty was speaking of concern in the housing market, the Office of the Superintendent of Financial Institutions also made some changes.
Those changes made by the OSFI are the same guidelines that they’ve been kicking around since March and have been spending months getting industry opinion on. And while OSFI’s new rules don’t make borrowers re-qualify upon renewal, they too could make it more difficult for borrowers to get mortgages and second mortgages.
Much of the new rules surround HELOCs, which now will be cut to a maximum of 65 per cent rather than 80 per cent of the existing equity in the home. And although these loans will still act as a revolving line of credit, wherein the borrower can withdraw and pay down whenever they can, OSFI says lenders must now only approve these loans with a reasonable expectation that the borrower can pay them back.
The Canadian Bankers Association didn’t agree with this last step, even though what exactly qualifies as a “reasonable expectation” isn’t really clear. However they said in response to OSFI’s new rules that Canadian banks “have a strong track record in careful, prudent lending and for being the soundest banks in the world for four years running. We are in the business of lending to people who will pay it back.”
The CBA obviously wasn’t thinking about earlier this year, when many of the banks were calling on Mr. Flaherty to tighten mortgage rules. It was those same bankers that became offended when Flaherty told them to do their jobs and run their business, and to stop relying on him to force them to do it properly.
However, it wasn’t just the CBA who disagreed with all of the new changes being made to mortgages last week. Jim Murphy, chief executive of Canadian Association of Accredited Mortgage Professionals, also released a statement in which he said, “Taken together, the Minister’s announcement Thursday and the OSFI final guidelines may have an effect of precipitating the housing downturn that the government desperately wants to avoid.” He also thinks that the government is taking part in “too much tinkering with the market.”
What do you think? Are all the new mortgage rules too much? Or are they just the tinkering we needed?
