Jim Flaherty's latest intervention in the mortgage market has drawn the ire of some of his fellow parliamentarians.
Small Business Minister Maxime Bernier believes the finance minister overstepped his bounds by having his office phone Manulife Financial and ask that it withdraw its discount on five-year mortgages to 2.89 per cent from 3.09, which it did.
Manulife has rescinded a promotional offer it had been offering consumers of a record-low five-year mortgage rate after Finance Minister Jim Flaherty indicated his displeasure with the lender's decision.
On Tuesday, Manulife Bank dropped its posted interest rate for a five-year fixed-rate mortgage to 2.89 per cent. That's the lowest posted rate for that time frame the company has ever offered. But in an about-face later in the day, the company pulled the offering and reverted to its former rate above three per cent.
"After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate," the company said in a statement
.Canada to tighten mortgage rules: source
OTTAWA (Reuters) - Canada is set to tighten mortgage rules on Thursday as it seeks to cool a heated housing market, by cutting the maximum term of mortgages and reducing the amount a home buyer can borrow, a government official said on Wednesday.
The announcement, expected at a news conference with Finance Minister Jim Flaherty, will be the fourth time the government intervened to curb the mortgage market since 2008.
The Finance Department says Flaherty is scheduled to hold a news conference on Thursday at 8:15 a.m. (1215 GMT).
A government official, who spoke on condition of anonymity, said the government will reduce the maximum amortization period of a mortgage to 25 years from 30 years, and lower the level of home equity that can be borrowed against to 80 percent from 85 percent.
On its main evening news program, the Canadian Broadcasting Corporation said changes at the government housing agency responsible for insuring
Source : (Reporting By Louise Egan And David Ljunggren; Editing By Janet Guttsman And Eric Walsh)
Two years ago to the day, the Finance Department promised to “bring greater clarity to the calculation of mortgage pre-payment penalties.”
Later this year, that promise will become realized.
The government has just announced a brand new mortgage “code” that requires federal financial institutions to:
Lenders frequently offer lower interest rates for faster closes (since quicker closings save hedging costs and have lower cancellation rates).
When choosing a rate hold period for your mortgage (e.g., 30 days, 60 days, 90 days, etc.), it’s often necessary to:
•compare your closing date to a particular rate hold expiry date, in order to determine the shortest rate hold period that applies, or
•determine how long to hold off on submitting an application, in order to qualify for a shorter rate hold (and a better rate
Several smaller lenders are now running promotions on insured quick-close (IQC) mortgages, specifically those with 5-year fixed terms.
“Quick closes” are mortgages that must close within 30-45 days—sometimes within 60 days.
“Insured” means the borrower must pay a default insurance premium—which is routine when you put down less than 20%.
A greater number of IQC promotions have started popping up within the past week. Those specials generally entail either:
•lower rates (e.g., ~10 bps extra discounting), or
•slightly higher compensation for brokers (which brokers often pass on to the client in some form).
Canada has 2.67 million self-employed citizens, about 15% of the work force, says CAAMP.
Due to how they report income and deduct expenses, these individuals are frequently reliant on stated income mortgages.
A few weeks back, Bloomberg quoted Canada's bank regulator, OSFI, as saying stated income mortgages "have some similarities to non-prime loans in the U.S.”
Just weeks before that, CMHC announced limits on bulk mortgage insurance, which lenders use to reduce risk on conventional mortgages.
Given these developments and heightened risk aversion in the industry, it’s not coincidental that mainstream lenders like TD, FirstLine, Scotiabank, Street Capital, etc. have tightened up—or abruptly eliminated—their stated income programs.
Households could…experience a significant shock if house prices were to reverse.”
That a primary conclusion from the Bank of Canada's Winter Review released last week.
We list some of the report's more intriguing findings below…