Thursday, 21 June 2012

Bank of Canada Change Lending Rules in Canada June 21, 2012

Source Globe and Mail


The country’s biggest banks were caught off guard on Wednesday night as the Department of Finance prepared to clamp down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.

Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property’s value, down from 85 per cent.

The moves are designed to cool the housing market and limit the record levels of personal debt Canadians have amassed in recent years. Figures from Statistics Canada show the average ratio of debt-to-disposable income climbed to 152 per cent, up from 150.6 per cent at the end of 2011. A rise in interest rates or further job losses could put some households at financial risk, endangering any economic recovery.

The Bank of Canada is expected to keep interest rates low for some time because the economy shows little sign of a strong recovery, so tightening mortgage rules is one way to ensure Canadians don’t get in over their heads during a prolonged period of ultra-low interest rates.

Reducing the maximum amortization on government-backed mortgages will eliminate the 30-year mortgage for most borrowers in Canada. The changes, which are expected to be unveiled at a news conference in Ottawa on Thursday morning, will translate into higher monthly payments, but result in the loan being paid off sooner.

Ottawa will announce two other changes, according to a source. It will no longer allow high-ratio mortgages over $1-million, and it will cap the gross debt service (which looks at a consumer’s total debt payments as a percentage of their income) at 39 per cent. While many banks tend not to allow mortgages over 40 per cent, there had been no official rule in place.

It is the fourth time in four years that Ottawa has moved to cool the housing market by tightening mortgage rules. In early 2011, Finance Minister Jim Flaherty reduced maximum insured amortizations to 30 years, and limited borrowing to 85 per cent of the property value.

CIBC economist Benjamin Tal described the changes as a “gentle push,” since the government didn’t make alterations to the minimum downpayment required on mortgages, which stands at 5 per cent.

“The fact that they didn’t change downpayments is a realization that doing so would probably be too severe given that the market is slowing down,” he said.

However, there remain concerns the changes could cause too abrupt a shift in the market. “All of these things might precipitate the housing market downturn that the government wants to avoid,” Jim Murphy, CEO of the Canadian Association of Accredited Mortgage Professionals, said in an interview.

Monday, 11 June 2012

June 2012 Market Watch Windsor Real Estate

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Year to date MLS residential sales totaled 2,083 at the end of May for all of Windsor Essex, this sales number was up 10.97% from one year ago.  
The average sale price for the first 5 month of the year totaled $171,896 compared to $162,563 for the same period last year. This marks an increase of 5.7%.
May’s Average Residential Sale Price was up 1.08% compared to one year ago. The May average sale price for residential came in at $177,789. This is highest average price for the month of May on record.
While other areas in Canada have seen significant inflation, Windsor continues to have average home prices of less than half the national average.  With the current strong auto-sector, and the enormous amount of infrastructure spending in the area, consumer confidence in the area is returning. With prices on the rise, now more than ever is a good time to invest in the Windsor Essex area.
Listing Inventory continues to remain low with only 904 new listings in May. May’s total listing residential inventory of  3,071 Units the lowest level for the month of May since 2003.
10 of the last 12 months had lower new listing inventory compared to the year before, and May of this year was no exception.  With continued low levels of inventory, the market is seeing more multiple offer situations for properties that are priced close to market value. We predict prices will continue to rise as they have for the past 2 years.
The increase in sales combined with low levels of inventory continues to push prices up. With rising prices, it is essential to use the services of a realtor, to ensure you have the latest up-to-date data, and receive professional advise when buying or selling a home.