Mr. Flaherty: Thanks For The Crappy Market!

CMHC’s Insurance Volume Dives 37%. 
The Repercussions

Canadian Mortgage Trends
The new mortgage insurance rules were intended to affect “less than 5% of new home purchasers.” That was Finance Minister Jim Flaherty's estimate from last June.

So far, he’s been pretty close to the mark. In the three months ending September 30, CMHC’s insured-purchase volumes are down 6%. (That drop isn’t due entirely to the rule changes, however.)

What Flaherty did not publicly predict was the extent to which high-ratio refinances, conventional securitized mortgages and smaller lenders would be impacted by Ottawa’s changes.

To start with, CMHC-insured high-ratio refinances (those with less than 20% equity) have plunged 22% Y/Y. CMHC attributes this to government policies that “effectively eliminated the high-ratio refinance market.”

On top of that, CMHC says its “portfolio (insurance…a.k.a. bulk insurance) volumes were approximately 98% lower” in Q3. That’s a direct result of it limiting “access to its portfolio product.”

That’s had noticeable effects on small lenders. According to one executive we spoke with, lenders like his can buy only 20-30% of the CMHC bulk insurance it could purchase just one year ago. And the big banks are also restricted, having been capped at $1 billion annually. Compare that to the $17 billion worth that Scotiabank bought last December alone. (More on why this matters) ...

Ottawa's Meddling Hasn't Fixed Unsecured Debt Problem

Debt sidelining homeowner dreams
A new report detailing a rise in unsecured credit is providing fodder for brokers concerned Ottawa has erred in focusing on mortgages.
Canadian debt loads grew at their fastest pace in two years during the summer, writes credit reporting agency TransUnion in its third quarter analysis, released Wednesday.
More specifically, the report finds that the average consumer non-mortgage debt jumped 4.6 per cent in Q3 2012, compared to the same period last year.
It did the same compared to this year’s second quarter, rising 2.1 per cent in the summer.
“It’s almost been two years and it’s the largest year-over-year increase we’ve had and I think it’s the largest quarterly increase we’ve had during that time period as well,” said TransUnion VP of Analytics Thomas Higgins.
The growth roughly coincides with Ottawa’s crackdown on mortgage growth with new tighter rules introduced in July. Stricter lending guidelines for federal institutions were also brought to the market, creating a double whammy effect responsible, say critics, for the rapid de-acceleration home sales.
Read more here (Mortgage Broker News).

Flaherty Hints ... Maybe a Bridge Too Far with "Rule Changes"

Flaherty: No more room for rule changes

Mortgage Broker News
Brokers have heard it before, but the Finance minister is saying it again – this time with more conviction – arguing the government simply has no more room to play with the mortgage rules in order to curb household debt.
“We’ve done enough,” Flaherty said during a weekend interview. “I do not intend to do anymore.”
If true, that's good news, say most mortgage brokers.
Many of them complained that the guidelines and rule changes introduced by the Conservative government this summer in order to slam the brakes on an overheated housing market were too harsh. Flaherty himself had earlier conceded that the economy could take a beating with the changes, but called the tighter mortgage rules around amortization and LTV for refinances necessary to prevent a housing bubble.
During Saturday’s interview, the minister said he was pleased by signs of a slowdown in vital segments such as condo markets in white-hot centres Toronto and Vancouver.