Even though we have seen a number of changes in the last two years towards tightening up the mortgage qualifying rules both for new property purchase and mortgage refinancing, there is still further conversation being had by the powers that be that still further changes may be required to ensure the stability of both the housing and mortgage industries.
While the last set of mortgage rule changes appear to have slowed down the mortgage market somewhat, there are still those that believe the housing market is still overheated and fear that a housing bubble exists and will burst sometime in the near future.
The two areas of tightening currently being discussed is to increase the minimum deposit for insured mortgages from 5% to a higher amount, some where in the 7.5% to 10% range. It wasn’t that long ago when the minimum amount was zero, so bringing it now up to say 10% would have a significant impact on the housing market as a whole as first time home buyers are largely what drives housing sales.
The deposit issue definitely has its advocates and detractors. Regardless of what size of the fence you sit on, this would be a significant lever to pull which could force everything in the other direction, putting too great a damper on the market.
With respect to shortening the amortization period, the discussion has centered on reducing the maximum available amortization from 30 years to 25 years.
For new home buyers, the net effect of this move would be to reduce the amount of house they could afford as payments would now be higher under a shorter maximum amortization term.
The flip side of this is not to stifle choice of those that are financial stable but want to use amortization as a way of managing cash flow.
Its likely that an increase in the minimum deposit amount would generate the greater impact of the two, but both will create challenges in the market for both new home owners and long time home owners.
And with rates still at near record lows for variable and term mortgages, there are lots of things to consider these days when seeking mortgage financing.
This is why its more important than ever to seek the assistance of an experienced mortgage broker to help you navigate through all the mortgage rule changes that have already taken effect and that are being proposed.