And the credit tightening continues….

It’s official… CMHC just announced further changes to their mortgage rules along with more details of the rule changes announced February 16.

-Qualifying mortgage rates…..up til now, borrowers were qualified on the contract rate of the mortgage or the 3 year rate ….on April 19, that will change to qualifying at the posted rate of the chartered banks …..Effectively, the govt has increased the rate without increasing the rate….quite a magic act…

Let’s think about this for one minute… we have been hearing about the devastating affect to consumers and the housing market should interest rates increase by 1.00% or more… well, the new qualifying rate is 5.39% as of today vs. 3.79% or 3.89% for a 5 year fixed contract rate….  but there’s more.. read on..

-Business for Self individuals will now have to qualify with traditional income validation if you are in business for more than 3 years… the logic is that the majority of self employed individuals can provide traditional income documents and that the business for self programs were for a small segment of the population…

This new change really leaves me scratching my head…. With 20 years experience in the Financial Services industry, I can tell you that the trend is for more Canadians to become self employed.. more contractual workers, less ‘Employees of a company’…  And one of the benefits of being self employed is that there are certain tax advantages that are not available to employees…resulting in a lower net income…

A lower net income will mean you better be able to come up with a 20% down payment because you won’t qualify under these new Mortgage rules that will be administered by CMHC…. I can only hope that the govt will be able to act just as quickly if they see the housing market slow down…

One Response to “And the credit tightening continues….”

  1. Andrew Pelt Says:

    nice article thx


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