Recently TD Bank decided to squeeze real estate investors’ balls further because the Canadian government, in its great wisdom, has decided to no longer allow bulk insurance for mortgages with amortization periods over 25 years. You can check it the details here.
This, despite the fact that these loans required a minimum of 20% down payments to qualify. Despite the fact that unlike mortgages on principal residences, that is homes that typically generate no active income whatsoever, these mortgages are taken out on income generating properties.
So intrinsically, mortgages taken out on investment properties are lower risk than many home owners mortgages.
These mortgages have been favoured by real estate investors and landlords as a means to keep borrowing costs lower by being afforded the ability to repay the mortgage over periods of up to 30 years, instead of the usual 25 year maximums currently allowed for principle residences.
Here is some perspective on these changes.
1) The Canadian government has effectively made a decision to pass the buck to the banks since is has now decided to disallow them from purchasing bulk mortgage insurance on these already lower risk loans.
Previously banks were allowed to pay out of pocket for bulk insurance on these mortgages, which required minimum 20% down payments to begin with. They chose to do this as a way of mitigating or outright transferring the risks of any potential default on these mortgages from the banks hands to mortgage insurers, like CMHC.
2) Under the new rules, since banks are no longer allowed to pass on the risk of potential investment mortgage defaults to mortgage insurers, like CMHC, they have instead decided to charge premiums for investment property mortgages.
3) What this means is that real estate investors and landlords who are now faced with higher borrowing costs are likely to pass these higher costs to renters in the form of higher rent charged to their tenants, the end user and consumer of housing.
So expect market rental rates to rise.
Canadian government officials and agencies continuously spew statistics of how dangerously low affordable housing levels are in many areas of the country, especially in the country’s hottest and most expensive real estate markets like Vancouver and the Greater Toronto Area.
Yet instead of setting policies to improve the affordable housing shortages, by increasing supply of affordable housing to meet sky high demand, they have decided to exasperate the problem even further by forcing landlords to charge even higher rental rates and thereby making housing even less affordable!
Let’s just say that their actions speak much more louder than their words.
Basic grocery bills expected to rise 2-10% in 2017 and housing costs are sky rocketing for both buyers and renters.
While at the same time B.S. “officially posted” inflation and CPI rates are hovering at around 1.5%. This artificially low posted rate of inflation has absolutely nothing to do with actual inflation rates of pretty all those things we as Canadians need for survival, like food, shelter, electricity and heating.
Yet in our governments great wisdom annual increases to fixed income, social assistance income, CPP income, Old Age Security, EI benefits and quite frankly most if not all government assisted living allowances, pensions and social assistance payments are calculated using this B.S. posted CPI rate.
This means that those Canadians who have failed to save adequately for their retirement, Canadians who rely on their Canada Pension Plans and Old Age Security payments and indeed any Canadian who rely on any form of government assistance whatsoever, will find themselves in a very precarious position indeed.
The price many Canadians are being forced to pay to simply survive is steep and getting even more expensive daily.
More and more, they will now need to choose whether they wish to pay for their housing costs but go without food, or go without heating or electricity or clothing or medicine or any other things they absolutely need for survival.
Is it not time for government officials at all levels to get their heads out of their asses? Is it not time to stop talking, to stop implementing bullshit policies that only make things worse not better?
Here’s a thought:
Instead of spewing more bullshit, instead of putting policies in place that exasperate the problems further, instead of taking months and even years and millions of dollars of conducting affordable housing studies to come up with policies that address lack of affordable housing issues that have been blatantly obvious for several years now, why not simply focus on implementing policies immediately that actually work in resolving Canada’s affordable housing shortage challenges?
It seems quite obvious that common sense is becoming a lost art form at all levels of Canada’s government.