Develop your own plan + MORE Dec 24th

Ottawa has a policy that, if it works as intended, might cause an economic crisis.

The objective of that policy is to reduce mortgage lending. It means that a potential home buyer who can comfortably afford the costs of buying a home (based on their actual mortgage interest rate, which will usually be less than three per cent) might not be able to get financing, because of a new, very high “stress-test” hurdle (using an interest rate that is currently 4.64 per cent, and far above actual market rates).

The policy will reduce home buying. There are also strong hints that the government would like to see a drop for house prices.

Ottawa is rightly very concerned about the rapid rise in consumer debt, including mortgages, which has been growing quite rapidly for more than a decade. In fact, it has been a major part of the national conversation since the start of the recession in 2008.

On November 18 in London England, Evan Siddall, the President of the Canada Mortgage and Housing Corporation (CMHC), delivered a speech that discussed the rationale for the policy…

Steward Kinmond, 70, and Barbara Sibbald, 58, in front of their mortgage-free new-build, close to Parliament Hill. (Photography by Jessica Deeks)
Every morning, Barbara Sibbald and her husband Stewart Kinmond gaze out across their big backyard and watch the sunrise. Directly behind them is part of their retirement plan—standing as solid as a brick house. Because, well, it is a house. A big, old Victorian, in fact, that’s been retrofitted into a triplex just 15 minutes away from Parliament Hill in Ottawa.
When Barbara met Stewart just over a decade ago, he already owned two rental properties, including the Victorian triplex. After three years of dating, the two divorcees decided to tie the knot, but agreed: They’d live separately in their own homes. “We’re both artistic and needed space to create,” explains Barbara, an award-winning health journalist who also has a book of short stories coming out next March.
At the same time, Barbara started to look for her own investment property as a way to top up her nest egg…

VANCOUVER _ Economists are panning the British Columbia government’s recent pledge to help first-time homebuyers get into the housing market by pitching in for the down payment.
Experts say the policy could end up doing more harm than good, boosting demand _ and therefore prices _ by encouraging even more people to vie over the same number of homes.
B.C.’s Home Owner Mortgage Equity Partnership program would provide loans that are interest-free and payment-free for five years to residents buying their first home, capped at five per cent of a property’s purchase price to a maximum of $750,000.
Thomas Davidoff, an economist at the University of British Columbia, says the announcement sends mixed signals to the market because it counters the federal government’s move earlier this year to tighten mortgage lending restrictions, which was intended to cool Canada’s already piping-hot housing market.
Joshua Gottlieb of the Vancouver School of Economics says instead of promoting home ownership, the province’s policy promotes owning a small fraction of a home while taking on big risks with borrowed money, a risk that taxpayers could be on the hook for if buyers default on mortgage payments…

Current and prospective homeowners may be dealing with information overload after the Canadian federal government recently announced a brand new set of mortgage rules. Some came into effect in October, while others kicked in at the end of November. While these new rules raise many factors to consider, notably they will make it harder to qualify for an insured mortgage — an insured mortgage is required when a down payment is less than 20 per cent of the purchase price. If you are out shopping for a house right now, it’s important to know how the rules will impact you. Being prepared can help you avoid costly mistakes in your home buying journey.

Tighter terms for insured mortgages

As of November 30, you can only qualify for an insured mortgage on properties that are owner occupied. On top of this, the loan has to be amortized to a maximum of 25 years and the purchase price cannot be more than $1 millon dollars. The buyer must have a minimum credit score of 600 in order to qualify for an insured mortgage…