The Great Mortgage Reset

A FOUR PART SPECIAL EDITION… PART 1 of 4

Canada’s mortgage lending rules and policies are broken.  They just don’t work.  And the more our Federal government tries to help, the worse it gets.  Message to the government… STOP TRYING TO HELP!.. CAUSE YOU AREN’T! 

And if you think the interest rate cuts will solve all of this, guess again. There’s a lot more to it.

The dream of home ownership doesn’t need to end. It’s part of our social fabric. We need to reverse this trend. 

I’ve put together a summary of mortgage rule changes starting from 2006 to show how just 18 years ago, it was way easier to buy a home.  From 2006 to 2008, the government promoted home ownership by extending amortizations up to 40 years and interest only payments. They allowed for lower down payments or even $0 money down mortgages.  

Then, after the US subprime mortgage crisis of 2008, everything would change.  The pattern would be and has continued to be a mortgage lending rule tightening strategy. The goal was to protect us from ourselves. Big brother looking after us, sort of thing (something I never endorse and should alarm all of us).  The government also wanted to remove speculators and discourage investors from buying rental properties. I think it’s safe to say, this has backfired big time.

Today, it’s the average Joe and Jane, the little guy and gal, the middle class, that has been pushed out of owning a home.. And in many cases, renting one, too!  Housing costs are beyond the reach of most of us.  

You’ve all heard this stuff before.. 

But maybe there’s a better way?  Having worked in the Banking and Mortgage industry at senior levels for 35 years now, I’ve learned a thing or two.   I truly believe we can fix this with a few simple changes. And we can do this almost immediately.    

We need to ask some questions starting with, what do Canadians want? Do we want government owned and operated housing units that they subsidize or rent back to us?  Or do we want to make home ownership a realistic goal or a dream?  Is Canada still a country where people from all over the world can come and own a home?  

Personal note.. My parents came to Canada in the early 1960’s with a suitcase and hard work ethic. The dream was to own a home and they did this quickly.  They kept their heads down, worked 2 and 3 jobs for much of my youth, bought a house and paid it off on their own. They taught me the ethics of hard work and I’m grateful for this lesson.

(remember this stat… Back in 2019, https://bit.ly/3zcAC4E  Royal Lepage reported that new immigrants, on average, purchased a home within the first three years after arrival).  And this is how it’s been for the previous 30 years.  But what about after 2019?  I can’t find any readily available data on this. I wonder how many are still able to buy within three years after arriving in Canada today?  

Here’s a little math to paint a clear picture…  I’m going to use an average house price based on the National average house price of approximately $812,000 according to Royal Lepage in Q2 2024. 

Today, the highest  mortgage you could get is $755.800. Your monthly payment would be $4,263/mth (we’re leaving out CMHC premiums out for simplicity).  What if that payment could be around 18% lower or $3,468/mth?  I’ll show you how this could be possible a little further down..

What if new homebuyers could buy an $812,000 house with a $40,600 down payment instead of the required minimum $56,200 today?  

And what if you could qualify for this home purchase with a household annual income of $138,000 instead of today’s requirement of a minimum income of $174,000?

Again, I ask the question to everyone, especially our leaders in government and those that have the power to change this immediately…. Who are we trying to help most?  If it’s the first time homebuyer, then why aren’t we making some simple changes to make this a reality?  

This is an in depth report on Canada’s broken housing and mortgage policies… and what we can do to fix it.

In Part 2 we will Identify the 3 main problems causing unaffordable housing and some solutions for a quick and easy fix.  

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.