The Real Estate Industry and the economy as a whole can take comfort that the freshly minted federal budget did not take further measures to tighten the mortgage market. The minimum downpayment for purchases stayed at 5% and the maximum amortization remains untouched at 30 years.
A significant lobby group consisting of several bank executives and economists will surely be disappointed that their recommendations were not incorporated. These pundits were calling for a reduction to the maximum amortization to 25 years and an increase on the minimum downpayment to 7% to 10% of the purchase price.
“I find it a bit off that some of the bank executives are taking the position that the Minister of Finance or the government somehow should tell them how to run their businesses,” Jim Flaherty told reporters on Thursday. “They decide what they want to charge in interest rates.” It’s also true that they can set their own limits on amortization and minimum downpayments.
The budget also unveiled plans to provide legislation for covered bonds. The idea of these bonds is to provide further funding sources for mortgages. Hopefully it will free up needed capital from some of the smaller lenders. The smaller lenders need to have a seat at the table if we want to continue to have a competitive mortgage market with more choice and less risk. Flaherty don’t let us down now!