OTTAWA, Aug. 7, 2012 /PRNewswire/ -- Financial Post reports that stricter mortgage lending processes have been implemented by the Canadian government in an effort to keep a looming housing bubble at bay. These regulations are designed to slow inflation and limit the amount of capital that potential homeowners can secure when looking to purchase a home. Marnie Bennett, Broker and Founder of Bennett Property Shop Realty, believes that this will work to limit inflation; however, she is also aware of the fact that it will, most likely, result in higher rental rates throughout many cities, as potential buyers are forced to forgo home ownership and opt for renting instead.
The article asserts that borrowers are now only able to designate a maximum of 80 percent of the value of their property as collateral when seeking home-equity loans. This is 5 percent less than before these new regulations were implemented. Furthermore, the maximum amortization period dropped by five years and currently stands at a 25 year limit. Mortgage insurance guidelines have changed as well, as government support is limited regarding properties that are worth less than $1 million.
Gregory Klump, Chief Economist at CREA, notes that the announcement of the new regulations did not result in a spike in home sales, as was expected. "That's a big change compared to what we saw as a response to previously announced changes. It will take some time before the compound effect of previous and recent changes to regulations on Canada's housing market becomes apparent," asserts Klump.
Marnie Bennett knows that such widespread alterations in policy take time to take effect; however, her understanding of the industry allows her to reliably predict the ways in which these changes will affect the market.
"The changes in mortgage rules have been enacted to prevent potential inflation in the Canadian economy," states Marnie Bennett. "Due to global economic pressures, Mark Carney cannot raise interest rates, so the only solution to keep inflation moderate is to slow the housing market, which is a major driver of the overall economy. The new mortgage rules will have their greatest impact on first time buyers. Decreasing amortization will increase monthly payments, making home ownership unreachable for some individuals. For investors, this will continue to keep vacancy rates low, resulting in higher rents in many Canadian cities. Ultimately, the mortgage rule changes are equivalent to a 1 percent increase in mortgage rates."
Marnie Bennett is a leading estate broker in Ottawa, Canada. Founder of Bennett Property Shop Realty, Marnie Bennett offers services pertaining to condo and home development marketing strategies, as well as providing innovative sales strategies for resale homes from starter properties to multimillion dollar estate homes. Through a high degree of professionalism and industry insight, Marnie Bennett leads her clients through the real estate market with a tremendous dedication to customer service and continual professional development.
SOURCE Marnie Bennett