Housing Rush Before October 15, 2008…

As you may or may not have heard, that the government backed Mortgages will have to be minimum 5% down and a maximum of 35 years amortization.  Many purchasers are trying to scramble to get into the market with zero down or 40 year amortization before the Oct. 15, 2008 cut off date and because Albertans have taken up longer-term and zero-down mortgages with greater zeal than the rest of the country — especially in Calgary, where prices have skyrocketed in recent years — the greatest impact of the new policy, taking effect Oct. 15, will likely be felt here.

However, the changes are being made “to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the government says.  Personally, I don’t think we were headed towards a housing bubble.  Yes, prices have increased, but the market is currently correcting itself, and there is still much growth to come, and hopefully it is at a sustainable level.

As quoted in the Calgary Herald, Todd Fralic, regional sales director for Mortgage Intelligence, estimates 35- to 40-year mortgages make up about 20 per cent of his Calgary business. Fralic said getting rid of 40-year mortgages is going to be as big of an issue as getting rid of zero-down mortgages.

“I think it hurts the new homebuyer who’s trying to get in our market quicker,” Fralic said. “Other people disagree and say, ‘You know what, there’s nothing wrong with putting five per cent down on a house. If you can’t save your five per cent, then you shouldn’t be in the market.’ ”

We will have to see what happens to prices and the inventory levels over the next couple months, but I do think that the market will get a bit tighter before Oct. 15, 2008 and then settle down afterwards into Christmas months…

0% Down and 40 Year Amortizations are Now no Longer!

Below is a news release from the Canadian Government stating that there will no longer be 40 year amortizations and no more zero-down mortgages in Canada.  This will however take in effect as of October 18th, 2008, and will only effect new mortgages, while existing zero-down or 40 year mortgages will not be effected.

These changes are being made to  government-backed mortgages (insured mortgages including CMHC, AIG and Genworth).

These changes include:

-Fixing the maximum amortization period to 35 years
-Requiring a minimum down payment of 5%
-Establishing a minimum credit score requirement
-Introducing new loan documentation standards
Click Here to Download government-release-40-year-zero-down.pdf