There’s nothing surprising about the loosening of mortgage standards to spur growth. In the last real housing bubble of 1990, banks and government brought in stricter lending rules, making it tougher for borrowers to get a mortgage.
Fast forward to the present. We’ve yet to see a housing bubble or market crash, but the government has taken drastic – perhaps even unheard of – precautions to slow the housing market.
In 1990, I was working for the largest trust company in Canada. I can tell you that it has never been harder to qualify for a mortgage than it is today!
In 2006, we had more aggressive lending programs like zero-down payment options, and amortizations went from 25 years to 30, to 35 years and even up to 40 years!
There were interest-only mortgages (we just got a modified version of this back), and you could even finance your purchase for up to 100% of the purchase price.
Watch for financial institutions to begin loosening their lending policies in Canada as the appetite for mortgage business becomes greater. Lenders are not worried about defaults. Defaults and arrears are still at all-time low levels.
Mortgage qualifications have never been stricter. In fact, they’re too strict. The government has gone too far with unnecessary stress tests and the elimination of several homeownership products. We’re even seeing record high rents due to buyers not having access to mortgage products.
Come on, government: Bring back the Canadian dream of homeownership!
Stop telling Canadians that buying a home is a bad idea… That mortgage debt is bad or is to be viewed the same as other debt like high-interest credit cards or car loans. This just isn’t true. There’s a familiar phrase known as “pride of ownership”. People treat their homes differently when they own them.
Loosening will happen… it’s just a matter of when! Will it be the Trudeau government that makes the change? I don’t know. He seems to be going in the opposite direction. But an election is coming. You just never know what will happen!
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Steve Garganis: 416-224-0114; email@example.com
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.