The Federal govt of Canada and the Bank of Canada are supposed to operate independently. The Minister of Finance gives the Bank of Canada its objectives or its mandate. And the Bank of Canada is supposed to carry out that mandate. The dotted line is supposed to allow the Bank of Canada Governor to exercise his/her powers without fear of political influence.
But our current Finance Minister, Mr. Flaherty, doesn’t seem to like those rules. He has repeatedly opened his mouth at inopportune times. Take last year, for example, when he publicly criticized Manulife Bank and BMO for advertising a 2.99% 5 yr fixed rate. He actually asked them to pull those ads! Not that they were the lowest 5 yr fixed rates at the time, but they were the lowest advertised rates by a major BANK. (as my regular readers know, mortgage brokers had lower rates… as they usually do). Continue reading “New threat of Rate hikes… it’s called Finance Minister Flaherty.”
Julie Dickson, the head of OSFI (Office of the Superintendent of Financial Institutions) will not be back when her term expires in July 2014. She’s decided to not to stick around after making more lending rule changes in 2012, than I have ever seen, during my entire 23 year career working in financial services. OSFI is a regulatory body that provides regulation and supervision to 152 Banks, Trust companies and other Lenders. In short, they are auditors. Here’s a link to the major changes made just last year including putting CMHC under OSFI control.. more on that later..
Some say her claim to fame is that she was in charge during the worst banking and mortgage crises in history. And that Canada came out of this global financial collapse way better than any other country. It’s true, we did come out of this very well compared with the rest of the world… But what does Ms. Dickson and OSFI have to do with it? For me, this had more to do with luck, govt intervention and Canadians being our normal conservative selves. We were a little slower to adapt to U.S. style lending policies… Ask any financial expert and they will tell you we were just a few years behind the U.S. with regards to their wild mortgage lending guidelines… Continue reading “Top Banking regulator stepping.. OSFI’s Julie Dickson leaving in 2014”
It was bound to happen. BMO announced their so-called ‘low-rate’ (NO FRILLS) 5 yr fixed rate mortgage would be increasing to 3.09% from 2.99%. This comes shortly after the Federal Minister of Finance, Jim Flaherty, said that he called BMO and asked them to pull their 2.99% ads. Last week, the Minister’s office asked Manulife Bank to withdraw their recent ad promoting a similar low rate.
While, 2.99% isn’t the best rate today, it was the lowest advertised rate from the BIG SIX BANKs. It was somewhat symbolic. Of course, Mortgage Brokers have access to even lower rates through the wholesale mortgage market, but these lenders don’t have the deep advertising pockets that BMO or the other BIG SIX BANKs have. So the publicity surrounding this rate and the increase will get much more air-time. You can actually find full-featured 5 year mortgages at 2.89% today, through a good mortgage broker (a word of warning.. I’ve seen lower rates offered, and I have access to these products… but these products are not full-featured and come with some limitations that make them less attractive… just be careful when choosing your mortgage and your mortgage broker)… Continue reading “BMO caves in to Federal govt pressure and raises mortgage rate.”
Yesterday, we saw our Federal Minister of Finance, Jim Flaherty, admit to having his office phone up Manulife Financial and ask them to stop advertising their 2.89% 5 year fixed rate mortgage special. An unprecedented move for a government official… Yes, it’s true! But wait, it gets better (or worse). Flaherty admitted to calling up BMO personally, to ask them to stop advertising their 2.99% 5 year fixed rate (NO FRILLS mortgage). click here for the article.
Now, just a comment about these products and rates…. if you are a regular visitor to CanadaMortgageNews.ca then you’ll know the BMO low-rate (or NO FRILLS to be more accurate) is a terrible product with too many restrictions and limitations… Manulife has a decent product….rate is competitive, however, like most other Bank’s, there is some mystery about what their best rates really are… so once again, you can’t rely on a website or bank advertising when it comes to finding the best mortgage…a mortgage broker is the best way to get unbiased advice with access to dozens of Lenders. Continue reading “Canadian Govt doesn’t want you to find the lowest mortgage rate.”
Canada’s Minister of Finance, Flaherty, surprised many today by tabling a budget bill with a major legislation change. The bill would move Canada Mortgage and Housing Corporation (CMHC) under the control of the Office of the Superintendent of Financial Institutions (OSFI). This would also give the Minister of Finance even more control over CMHC. Here’s an article in the Globe and Mail.
So let’s think about the impact of this proposed legislative change… Over the past 4 years, we have seen numerous changes to CMHC lending policies…
- Maximum amortization has dropped from 40 to 30 years.
- interest-only payment mortgages came and went in 2 years.
- 100% loan to value or no money down mortgages came and went over a 2 year period….. you must now put at least 5% down payment.
- rental property mortgages could be had for up to 100% loan to value and are now not being insured at all.
- Business for self could get mortgages up to 95% for purchases but are now capped at 90% ltv.
- You could Refinance your mortgage for up to 100% ltv and now it’s capped at 85% ltv.
- Variable rate borrowers have to qualify at BIG SIX Bank posted 5 yr rate, compared with discounted 5 yr rate or 3 yr fixed rate. A clear move to force you into the higher 5 yr fixed rate…. supposedly it’s safer to be in a 5 yr fixed rate…(guess the govt has looked at any rate comparison charts for the last 20 yrs).
- Secured lines of credit could be had for up to 90% ltv CMHC insured, then CMHC pulled out altogether leaving the max at 80% ltv and now OSFI wants to cut them back to 65% ltv (this move has everyone confused and puzzled).
Aren’t all these changes enough? How much tighter does the govt need to make it? And all these changes have come prior to Julie Dickson, head of OSFI, being involved…. What scares me and should scare you, is that OSFI has come out and stated they want to cap the amount of equity you can access in your home…. That’s right… OSFI wants to limit your secured line of credit to 65% loan to value. This proposed change is beyond my understanding. It’s so out of line that it defies any common sense. For the first time that I can remember, the govt is telling Lenders and Banks how much they can lend to you for uninsured loans. If you don’t like this, then stand and up and have your say… write to OSFI and tell them you don’t agree…
I can tell you that within my own base of clients, this will affect a great number of people… the professionals, the business for self, the investor that wants to borrow to invest… remember, these are everyday people that want to do better but will now be handicapped by your govt because they can’t access the equity in their homes.. It won’t stop them, it will just cost them more to borrow as they seek other, higher interest credit products…. (Banks will win yet again).
If OSFI does gain control over CMHC, then lookout… we can only imagine the possible changes that they are conceiving.
So which report do you want to believe….? 2 separate reports… both from April 10, 2012. We have Reuter’s reporting that Canada’s Finance Minister Flaherty, isn’t making any changes to mortgage rules…. Click here for their report. Here’s a quote from the article “I have no present plans to intervene in the housing market in Canada,” Flaherty told reporters in New York.
And here’s another report from Bloomberg.com entitled “Flaherty Says He’s Planning Changes on CMHC Rules.” Click here for their report. Are you confused yet? Well, you’re not alone. The mixed messages are everywhere today. Bank of Canada Carney warning about record high Personal Debt Levels…. you’ve seen this one, I’m sure. We have too much personal debt… and then another report says Canadians are ready to tackle their debt level… and yet another one that say the economy is very fragile and is at risk of slowing down…
It’s hard to know which report is correct. One thing is certain… today’s mortgage rates are at historical lows. The govt and the BANKS don’t want them to last. If you have a house and some debt, or if you are considering buying a house, then why wouldn’t you take advantage of these low rates…? I’m NOT saying to go out and borrow more money for a TV or new car or other luxury items… If you have high interest debt, or higher interest debt than today’s 3.00%+ interest rates, then take action and restructure your finances… Today’s record low rates won’t last… You can still benefit from these historically low interest rates.