Nov 2012 – Obama & Rule Changes

Following Obama’s presidential victory, bond yields dropped with markets predicting a slower economic recovery and more stimulus.  Bond yields dictate fixed mortgage rates, therefore, upward pressure still remains low. With the impending US “fiscal cliff” there is enormous economic uncertainty and the outlook remains bleak. This reinforces the Bank of Canada’s decisions around monetary policy and indicates that the key lending rate won’t change much until optimism returns and the economy grows.

Following the mortgage tightening back in July, OSFI’s B-20 rules became effective Nov 1, which will further impact a mortgagor’s ability to borrow money.  Here’s a summary below:

  • Tighter debt ratios on uninsured, non-prime mortgages
  • Stricter proof of income for self-employed borrowers with more than 20% down
  • Stricter guidelines for calculating a borrower’s minimum monthly payment on unsecured debt
  • Stricter policies for estimating heating cost for debt servicing
  • The end of cash-back down payment mortgages

Bottom line, lending has become more difficult yet again in an attempt to contain household debt and protect the housing market. These changes do not affect all lenders equally. We, as brokers, are well positioned to know where a tough file will get funding. If you or someone you know is having difficulty getting financing with a certain bank, please don’t hesitate to call or email.

Talk soon,
Gord, Steve and Jeff

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