Flaherty budget answers mortgage broker pleas
PHEW! Brokers are breathing a sigh of relief after the Finance Minister rejected calls to tinker with mortgage insurance rules, offering a budget that leaves the maximum amortization cap at 30 years and the minimum down payment at 5 per cent.
While moving to cut 19,200 bureaucratic jobs over the next three years with an eye to slashing $5 billion from the federal budget, Jim Flaherty left the current regime of mortgage rules in place.
The reprieve, at least for now, was anticipated by mortgage industry leaders from one end of the country to the next, and comes on the heels of broker lobbying efforts, spearheaded by CAAMP.
CEO Jim Murphy was in Ottawa for Wednesday`s budget focused on eradicating deficits by as early as 2015. He argued that the government listened to broker concerns about the importance of letting rule changes introduced over the last two years take effect, outside of the current extraordinary period of low interest rates.
“CAAMP’s overall message of not instituting changes that cause a housing downfall or that adversely affect job creation are being well received,” said Murphy. “In terms of mortgage insurance rule changes, given his announcement last week, I believe the Minister will continue to monitor … this does not prevent the government from acting in the future if they feel tightening is required.”
With the budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.
Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.
Exactly a week prior to Thursday’s communiqué, Flaherty used a media scrum to suggest he would resist calls for stricter rules.
“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 business,” Jim Flaherty told reporters just outside Ottawa Thursday. “They decide what they want to charge in interest rates.
“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed.”
Still, Murphy is anticipating the minister will eventually introduce some new rules to clamp down on mortgage growth.
“I’m expecting there to be legislation on covered bonds,” he told MortgageBrokerNews.ca. “This is a relatively new funding source in Canada and the question will be whether these products can be insured.