Jon Sowerby - Mortgage Guy Extraordinaire has this to say

Mortgage tightening just in time for a slower housing market? 1. Market Update - Has the Government pulled the trigger on a further round of tightening mortgages just as the housing sector is poised to slow down?. The Canadian Economy is growing at a pace that is slower than originally forecast and accordingly the Bank of Canada will hold off on any increases to interest rates at least until it's next announcement in September. Given Canada isn't truly expected to be on course until the second half of 2013 any changes to rates will be very gradual up until that point where it can be expected, assuming forecasts are in line with reality, that the BofC will begin a more aggressive pace of rate increases. http://www.680news.com/business/article/383433--bank-of-canada-keeps-interest-rate-at-1 News of this slowing growth comes on the heels of the Government of Canada courtesy of Minister Flaherty reducing the maximum amortization to 25 years for all CMHC insured loans along with a variety of other changes designed to further cool the Canadian housing market. That said, per the link below there are some who feel the market may have already been cooling on its own. http://business.financialpost.com/2012/07/16/new-mortgage-rules-simply-pull-hard-on-closing-door-as-housing-market-cools/ My Opinion? In layman's terms I believe the phrase self fulfilling prophecy is probably appropriate. We have been warned by financial gurus and the like ad nausea now for years about the impending implosion of our housing market. Well, if you sit in a position of power, keep trying to tighten things, get the media on side and then just be patient, the regular ups and downs of an economic cycle will eventually make you right. Accordingly, it looks like Minister Flaherty may eventually be right. The question is at what cost? 2. Amortizations - Why does the government think longer amortizations are bad and what can be done? So the government has capped out the maximum amortization at 25 years and some of you may well say good for the government! If you can't afford it on a 25 year amortization clearly you shouldn't have the home! The Gail Vaz Oxlades and Rabina Ahmed-Huks of the world delight in telling us how we should pay cash for absolutely everything and they enjoy throwing out simple rules about housing that your mortgage payment shouldn't be more than 25% of your total gross income. In point of fact I was listening to a radio show featuring the latter and she went so far as to say people taking a 30 amortization were in her view "irresponsible". Well, I happen to take exception to that on a few levels: First, the average price of a home in the GTA is slightly over $500k. Allowing for that rule and assuming you as a new homebuyer finally got enough to scrape together a down payment, pay the land transfer tax etc you need an income of about $150k to afford that house on their numbers. Remember we're not discussing a million dollar home - this is average and from the prices I've seen probably on the lower end. Secondly, I'm not sure when exactly it became necessary to pay a mortgage off in 25 years and why that number is "the" number but if average purchasers are around 30 years of age and people nowadays are expected to work until they're 67, I'm not catching the science behind the math of 25 years to pay off the debt. Third, a number of people will never pay down the initial mortgage completely until they sell and downsize. If you have equity in your home I don't see the big issue. Ask some seniors who are cash flow poor but asset rich because they've paid off their mortgage why they're sitting on a $500,000 asset? Most don't have a good answer because when they start to think about it they often wish they had perhaps put a little more of that cash into a savings plan and less into the mortgage payments. In many instances the option they are left with is called a reverse mortgage - a type of financing that enjoys a negative reputation and in my opinion for good reason. Interesting how you can only obtain those through the Canadian Mortgage and Housing Corporation. I am not suggesting this is a conspiracy but I think there is definitely some irony at play. Finally, what if you simply think it is prudent to have the ability to decelerate your payments for whatever reason? People have income interruptions like job loss or maternity leave. Sometimes they need to make repairs or want to start a business. Perhaps they want to buy some income properties and diversify some of their holdings. All of these situations are tailor made for a longer amortization. But rather than allow people the choice of paying more quickly or more slowly as necessary based on their situation instead the government has mandated that one size must fit all. Well, here at least I can offer some help. The fact is it is still possible to obtain longer amortizations under certain circumstances. The primary driver is the equity you have in your home - or simply put the difference between the value of your property and what you owe. If you have a property that has more than 20% in existing equity or you are purchasing a property and putting down 20% or more there is a chance you can still obtain a longer amortization. 30 and in a few cases 35 year amortizations! For those of you who do watch your cash flow this at least can be seen as a positive - but unfortunately these perks are only available to the well capitalized. Although it seems counter intuitive the people who are trying to make it, like first time buyers will simply have to make do with lower ams and higher payments. Unfortunately I think this will have the effect of keeping some younger Canadians and those with lower incomes out of the housing market for the foreseeable future. 3. Working with professionals: One of my goals as a financial professional over and above my goals as your mortgage professional is to provide you with a support network that will help you manage your complete financial and real estate situation in the way we have managed your mortgage situation – by putting you in touch with ethical, principled and knowledgeable specialists from a variety of fields. If you have questions or needs in any of the following areas: · TVH Mortgages run by yours truly, Jon Sowerby as Mortgage Broker and Broker of Record · TVH Financial, dealing with Investments and Insurance is headed by Jim Lao , Financial Advisor · TVH Legal, dealing with Real Estate and Estate law in addition to civil litigation is headed by Sonia Kociper, Lawyer · Finally, TVH Accounting is a work in progress and we hope to be able to provide you with more details very soon! We also know some excellent people in the following fields: o Real Estate o Property Insurance o Contracting Even if you don’t have a mortgage need at the present time but you need some help in one of the above areas please call or email me. I am privileged enough to work with some of the best in the business and I know they will take excellent care of you and yours. *Have a need in a field you don’t see above? Let me know, I might still be able to help! 4. Question? Comment? Know someone who might need help? Do you have a question or a comment? Do you know someone who is considering their financing options and would like some straight forward advice? Why not take a moment to send me your question? Email or phone me, whichever is more convenient. I’m always happy to help and why wonder and maybe miss an opportunity when a few minutes of your time could provide all the help you need. Take care and stay in touch! Jon Sowerby Verico TVH Mortgages Inc. 63 Lombard Street Toronto, ON M5C 1M2 Phone/Fax 416-488-0074 Toll Free 866-449-0074 www.jonsowerby.com Brokerage License No. 11946 License No. M08002811