$600billion, $250billion, 2.99%, $1.5trillion… numbers to watch in 2012
$600billion….Recently, we heard that there was another crisis looming in the mortgage industry. Last week, we saw CIBC make headlines when their wholesale lending division, Firstline Mortgages, made drastic changes to the lending policies, which included pulling out of the self-employment and new-immigrant lending programs. They also reduced their maximum mortgage limits.
So what happened? Why did Firstline Mortgages make these changes? Firstline told us this was in reaction to a report stating Canada’s self-employed and new-immigrant mortgages shared similarities with the U.S. Subprime mortgages. But maybe there was another reason… Shortly after this report, we got news that CMHC was approaching their mortgage limit. The report said CMHC ‘s total insured portfolio was $541billion as of the end of Sept 2011. The last increase was in 2008 when the govt raised the limit from $450billion to $600billion. But now it remains uncertain if or when the govt will raise that limit… So now we have lenders and bankers wondering how this will affect the supply of mortgage insurance.. so, what do they do? They cut out some of the less popular mortgage programs… Nice, huh?
$250billion….But we are forgetting the private mortgage insurers. Genworth Financial has stated they have plenty of capacity before they reach their govt approved $250billion limit (this limit is expected to increase to $300billion in a few months). The only challenge for private insurers like Genworth, is that the govt only guarantees up 90% of it’s insurance to the lenders…. but 100% for CMHC . This could case lenders to seek higher returns on their mortgages, meaning potentially higher interest rates…
2.99%….Remember that 2.99% No Frills rate special last month? I can’t help but wonder what the executive boardroom was like when they saw their mortgage department come out with this rate… at a time when the govt was clearly trying to cool the housing market and slow consumer borrowing… It’s early in the year, but this has to go down as one of the most ill-timed moves of 2012… Congrats BMO mortgage dept! You did bring No Frills products to the forefront. And this gave us a real opportunity to point out the shortcomings of this product..
$1.5trillion…Last years, we heard that personal debts levels had hit record highs. Numerous articles and reports are telling us that we are borrowing too much. Yes, it’s true, outstanding mortgage balances topped $1trillion for the first time in Canada. That means $500billion of non-mortgage personal debt it out there. And that number bothers me more than the mortgage balance. Mortgage rates are at historical lows… home ownership and property investments should be encouraged. But borrowing for new TVs, cars, computers and other items, should be discouraged. We have to make a distinction. GOOD DEBT VS BAD DEBT. There is a difference. Let’s not group all this debt in one category…
Steve Garganis View All
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
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