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CMHC mortgage regulations

CMHC tightens mortgage regulations slightly

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CMHC tightens mortgage regulations slightly

Canada Mortgage and Housing Corp. (CMHC) has tightened mortgage regulations slightly in response to deteriorating economic conditions brought on by COVID-19.

CMHC mortgage regulations

Effective July 1, new applications for homeowner transactional and portfolio mortgage insurance would have to meet a minimum credit score of 680 for at least one borrower. In addition, funds borrowed for a down payment that increase indebtedness will no longer be treated as equity for insurance purposes, and Gross/Total Debt Servicing ratios are to be limited to the standard requirements of 35/42.

Vulnerabilities

“COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” says Evan Siddall, CMHC president and CEO. “These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.”

Job losses, business closures and a drop in immigration are adversely impacting Canada’s housing markets, CMHC says, with potentially a nine- to 18-per-cent decrease in house prices over the next 12 months.

“CMHC’s policy changes come at an interesting time when the housing market finally seems to be getting back on track after a substantial drop in sales during April and May,” Jesse Abrams, co-founder and CEO of Homewise told Condo Life magazine. “These changes will not only make qualifications tougher, pushing up the floor for credit scores to 680, but also decrease the affordability of many buyers who need an insured mortgage by lowering debt to income ratios. Unfortunately, the hardest-hit market may be first-time homebuyers.”

Lesser impact

Another national mortgage insurer, Genworth Canada, says it has no plans to change its underwriting policy related to debt service ratio limits, minimum credit score and down payment requirements.

“Genworth’s decision to not follow CMHC’s policy changes creates a competitive advantage for them in the marketplace, while reigniting the flame of many prospective homebuyers who were demotivated by CMHC’s decision,” Abrams says. “Most lenders use both CMHC and Genworth, so it is quite possible that the CMHC policy change does not actually affect any homebuyers.”

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THE BROKER : Chasing the dream of homeownership

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THE BROKER : Chasing the dream of homeownership

By Matthew Ablakan
Millennial’s Choice Brokerage

As the housing market in Ontario continues to deteriorate, industry watchers are questioning whether millennials will be able to afford to live in their own homes. More millennials are living at home with their parents, whether their choice or because of circumstance and some researchers are wondering if millennials are giving up on their dreams of homeownership altogether.

However, a recent study dispels this belief.

According to a new study from private insurance provider Genworth Canada and the Canadian Association of Credit Counselling Services, nearly one-in-three Canadian millennials are planning to buy a home in the next two years.

This marks a 7 per cent increase over the 23 per cent of Canadians looking to purchase a primary residence in 2018, according to a recent survey from BMO. The 30 per cent figure supports the findings of Zoocasa’s 2018 Housing Trends Report, which found that 84 per cent of millennials surveyed felt that owning a home was an important life milestone.

The Zoocasa report is corroborated by a new report from Ryerson University’s Centre for Urban Research and Land Development, which has found that over the next 10 years, 700,000 millennials will be looking to move into their own homes in the GTA. That could work out to 50,000 new millennial households every year.

“The needs and wants of millennials are a little different than generations that have come before them,” reads the report. “Many of them are entering a stage where they will prioritize space and affordability over amenities and access to transit. … In an unconstrained market, the homeownership rate for millennials in the GTA could rise from 40 per cent in 2016 to 60 per cent in 2026.”

As millennials in the GTA start to make their housing dreams a reality, more pressure will be placed on an already tight marketplace.

“There will be even stronger demand for the limited supply of ground-related homes across the region, putting continued upward pressure on prices over the long-term, leading millennials to take on high debt loads to take on homeownership,” reads the report.

The report also notes that Ontario has been losing millennials to other provinces as they look for more affordable housing options. This suggests that in the near future employers will have to consider affordable housing if they want to remain competitive.

“Ontario … loses individuals between the age of 25 and 44 to other provinces in search of more affordable housing and jobs,” reads the report. “Retaining this talent and attracting them to the major city centres will require offering them better job prospects and more housing choice, especially lower density housing.”

“Homeownership remains a coveted goal for many Canadians,” reads the Zoocasa report. “However, achieving this perceived life milestone remains as challenging as ever in 2018, as increasing home prices and a rising interest rate environment present obstacles to ownership.”

Over half of millennials surveyed reported that housing is unaffordable in their respective neighbourhoods.

Over 58 per cent of non-millennial Ontarians also stated that housing is unaffordable in their neighbourhood, with 41 per cent citing down payment as the largest barrier to owning a home, according to a OREA/Nanos survey.

“The dream of homeownership is slipping away from an entire generation of young people,” writes OREA CEO Tim Hudak. “Nearly half of Ontarians between the ages of 25 and 34 are still living at home with their parents. We need to take action to address this problem.

For more information on Canadian millennials and how they exist in the real estate marketplace, or if you are looking to explore potential real estate opportunities yourself, please contact us at info@millennialschoice.com

Matthew Ablakan is Broker of Record for Millennial’s Choice Mortgages Inc. Brokerage and Millennial’s Choice Insurance Inc. www.MillennialsChoice.com

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Millennials the engine of the real estate market

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Millennials the engine of the real estate market

According to a national study commissioned by Genworth Canada, six in 10 (59 per cent) millennials have already achieved their homeownership dreams. Among those who own their homes, three in 10 (30 per cent) millennials bought their first home or a home that was not their first in the past two years, compared to just 9 per cent of older Canadians. And over the next two years, among non-owners another 30 per cent of millennials plan on making their first home purchase, making them the engine of the real estate market.

The annual poll, completed in conjunction with the Canadian Association of Credit Counselling Services (CACCS) from February 8 to March 27, asked 2,000 Canadians questions about their financial well-being, homeownership intentions and preparedness for the future.

The national Financial Fitness and Homeownership Study shows that Canadians remain committed to homeownership and those who own a home have better financial outcomes than those who do not. Homeowners are far more likely to say they are in great/good financial fitness versus non-homeowners. Heres the breakdown of those who say they are in great/good financial shape:

  • 68 per cent of first-time buyers;
  • 58 per cent of first-time intenders;
  • 59 per cent of repeat buyers;
  • 62 per cent of repeat intenders.

“It is encouraging to see the high level of financial confidence coming from first-time homebuyers and homeowners. As a company that is committed to providing financial literacy education to aid those looking to achieve homeownership, these results demonstrate that this segment of Canadians are doing the necessary homework to support their financial future,” said Stuart Levings, president and CEO of Genworth Canada.

Homeownership is a mainstay for many Canadians’ financial wellbeing and homeowners demonstrate greater financial discipline and report greater long-term confidence in their financial outlook.

Here is a look at how homeowners and first-time buyers/intenders feel about their financial shape:

“Being intentionally aware of the state of your personal finances is especially important when considering the purchase of a home,” said Henrietta Ross, CEO of the CACCS. “Understanding how financially fit you are by exploring your Financial Fitness score at www.caccs.ca is quick, easy and free – but rich in value because it can help guide wise financial choices.”

This score is based on attitudinal, behavioural and outcome measures that were developed from Financial Fitness index benchmark data.

To read the full 2018 Financial Fitness and Homeownership Study report, visit http://genworth.ca/en/index.aspx

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