Home ownership a privilege, not a right.
It all started in the 1940’s – Central Mortgage and Housing Corporation was created (today known as CMHC, Canada Mortgage and Housing Corporation). The sole purpose of CMHC was to provide a means of affordable housing for returning WWII veterans. Canada was raw, underdeveloped, and about to embark on an explosive trajectory of home construction and urban development. What started as a program for social and rental housing in the ’40s, quickly grew in to a wealth generating addiction for the federal government, banks, and the general Canadian population. Throughout the 60’s and 70’s, immigrants flocked to Canada in search of a better life. One that included the dream of home ownership. This time period instilled the prominence of a generation that has had an impact on Canada’s economic ecosystem like no other – the baby boomers.
Back then, it was tough to qualify for a mortgage. In the 70’s and 80’s, banks required a down payment of at least 25% to qualify (I know, the price of real estate was substantially lower, but still relative to a degree). In fact, it wasn’t until 1999 when CMHC publicly launched a major initiative for first time home buyers allowing for mortgage qualification with a minimum down payment of 5%. From there the capitalist mindset and instinct took over and the qualification criteria loosened further as mortgage guidelines went into hyper thrust mode. At one point, every possible customer profile had a chance at qualifying for a mortgage. As long as you had a pulse!
And here we are today. Have we come full circle? It certainly feels like it. A few days ago The Office of the Superintendent of Financial Institutions (OSFI) announced its 7th major rule change since 2008, but this one quite possibly might take the title, ‘the mother of all mortgage rule changes’. As of January 1, 2018, ALL mortgage applicants will be subject to a qualification stress test. Whether you are putting 5% down or 25% the stress test will apply.
In a nut shell, you will have to qualify as though your mortgage is 2% higher than your actual contract rate.
I have heard many times that history repeats itself and this is one of those times.
We are going back to a time when owning a home was a privilege, not a right.
Heads up.
