Bankers and Ottawa discuss how to make it harder to borrow money…again

Jeff Evans

I found this article today in the Globe and Mail commenting on Federal government plans to make lending more difficult again in order to curb an increase in debt levels. Among the discussions that are supported by the banks are to make mortgage borrowing more difficult. If implemented, it will be the third time since 2008 that the federal government has taken these steps to cool an overheated “mortgage” market. Mentioned in the article is decreasing the maximum term that someone can take and increasing the minimum downpayment needed to purchase.

The rest of the article is quotes and opinion from bankers and government, but the thing that jumps out at me right away is that they want to make it more difficult to get a mortgage because people’s overall debt is getting too high and the low rates have caused people to borrow more than they could afford.

It occurs to me that while rates are low, they have already done plenty to safeguard the mortgage system against default. The mortgage market is very heavily regulated, and with good reason. However, it appears that there is not a lot of regulation in place for unsecured lending such as credit cards and subprime car loans (bankers do not consider car loans secured as it is a depreciating asset). I do not see much being discussed about making it more difficult for the banks to lend money unsecured. As such, I could see the banks wanting to make it difficult to borrow for mortgages because they don’t want their customers paying off their credit cards at 12%+ with a mortgage where they will receive 3%. Most people do not go on a spending spree with their mortgage proceeds, they spend on their credit cards and then run to the bank for a mortgage afterwards.

They also do not seem to be doing much to prevent the “keeping up with the Jones'” syndrome that is pandemic through society now. Everyone has to keep up with appearances it seems. Therefore everyone has to borrow so that they do not look poor to their friends. It appears to me to be a very dishonest way to live.

The way to prevent debt is to teach people responsibility in finance, and I for one never remember being taught that in school. It has never been refuted to my knowledge that the very nature of the monetary system we operate under is built to encourage and increase debt. We are also taught that an economy is usually at its best when people are spending money.

Until there is a fundamental change in how the entire system operates and in how people think, a mortgage will be the only way for most people to make debt more affordable. The market is not too hot right now, and is quite stable. It appears to me to be a ridiculous time to make it even more difficult for people to own their own shelter.

Author: Jeff Evans

I am a mortgage broker, hair salon owner, squash player, student, and husband, aspiring to do good for people.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles

Vancouver mortgage broker with “lower” fees
Jeff Evans
No Comments

I have had a in interesting case with a returning client who came to me recently for help with his mortgage.  As a mortgage broker in Vancouver, it is necessary to be creative in making solutions work for my clients, which currently can often involve secondary or private lending solutions.  This was a case where such creativity would be necessary.Read More

home buyer mortgage broker
First Time Home Buyers Mortgage Broker Tips And Tricks
Jeff Evans
No Comments

Among the services I provide to my clients, I consider myself to be a "first-time home buyer mortgage broker".  As a first time home buyer mortgage broker, I know how difficult it is to get into the real estate market, particularly in Vancouver, and it brings me a particular amount of job to help someone get past the challenges if being a first time home buyer.

I have recently completed an e-book and will be launching it soon.  I believe it will be very helpful for not just first-time home buyers, but for anyone who is not as knowledgeable in residential mortgage lending, about how to make your home buyer mortgage broker application appealing to a mortgage lender.

As a sneak preview, here are three tips on improving your mortgage application as a first-time home buyer.

3 Home Buyer Mortgage Broker Tips

  1. Take advantage of the home-buyers plan to fund your down-payment.  This program is not technically ONLY for first-time home buyers, but all first-time home buyers are eligible.  Under the plan, you can borrow up to $25,000 from your RRSP for the purchase of an owner-occupied residence.  If you and your spouse are both applying, then you can withdraw $25,000 each. It is a loan, so it has to be paid back over 15 years (or 1/15th of the loan will be added to income for that year).  However, there is no withholding when you withdraw it, it does not have to all be declared as income on any given year, and you don't even have to use all of it for down-payment!  You can use it for any purpose that you need it for. A good mortgage broker, like myself, can help you with some of the finer details and complex situations that often arise from these situations.
  2. Make sure you pay your bills on time. If you have a high balance on your loan, or you have a lot of debt, those also have a significant negative impact on your credit score, but you can get the bills down and there is no record of your high debt levels.  However, when you miss a bill payment, it stays on your credit bureau for 6-7 YEARS.  This not just negatively impacts your credit score, but lenders look at this when assessing risk, and they have been particularly uncompromising and (unreasonable, paranoid, strict...and other words that I cannot put in print) in the last few years.  While you likely do not have to wait 6-7 years to become bankable if you have had gone through a period of bad credit, the less negative credit on the bureau, the better. At least make the minimum required payments and you will go a long way to making yourself appealing to them.
  3. Having no credit is just as bad as having bad credit. Many people feel that not requiring credit should prove your ability to pay your bills and should be good evidence of credit-worthiness.  This is not how mortgage lenders think.  If you currently do not have any credit, then you do not have any documentation that you are an acceptable credit risk, and no matter how strong your income is, you will have difficulty obtaining a prime mortgage approval.  Make sure you have at least 3 different credit facilities in your name.  (Secondary credit cards in a spouses name are not considered acceptable for establishing your credit).

I am excited to launch my home buyer mortgage broker e-book soon, in which I go into much greater detail and give many different ideas to help home buyers prepare for home ownership, but as a mortgage broker in Vancouver, you are welcome to contact me in the meantime to discuss your circumstances and see if there are any options for you.

mortgage broker Vancouver BC
Good news regarding OSFI rule changes
Jeff Evans
No Comments

This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the current guidelines into the new year by up to 120 days provided that I have an application and am able to get a pre-approval in place with a lender for you before January 1.Read More