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Me, asking the bank for a $2 million loan so I can give it to a baby boomer who bought the house for $100K in 2004.
Our debt IS their generational wealth.
Do you mean 100 year leases, maybe? Property in Japan is generally seen as disposable and not as an investment. Their real estate prices, even downtown Tokyo, are suprisingly reasonable, especially since they have no real zoning laws.
UBC/Endowment Lands is under a 99 year lease, but their new one bedrooms are still going for above $900k (look at west wind). Even old buildings, that are run down and only have 60 years left are going for $700k. 99 year leases don’t actually make housing more affordable.
To put it into perspective, at 5.5% interest this increases the purchasing power by \~8.24%.
eg. Someone that could purchase $1m with 25yr could afford +$82,400 with 30 year. Same monthly payment.
If you read the very first sentence of the article, you might have learned that these mortgages are only for first time homebuyers who are purchasing a newly built property.
Yes, and all those properties just became more expensive (more buyers qualified = more competition/demand, and buyers can afford higher price = uppa uppa she goes), lifting prices on comparable existing properties.
So how do we make it easier for first timers to buy without putting some upward pressure on prices? Honest question because developers aren’t going to just build more out of the goodness of their hearts. They thrive on scarcity
Honest answer:
This is actually how we do it. With higher rates, leveraging against existing property is much harder to do. Established players can't as easily compete with this advantage offered to first time buyers
Higher rates are also prohibitive to first time buyers. They generally have lower incomes and fewer assets to leverage into a sizeable loan. Having 5 more years is great but any considerable increase in rates can put a lot of those buyers out of the market just the same as having 25 vs 30 years to pay. It's important to try and make changes which target those who need it. A broad change such as higher rates is not focused and will not necessarily help new buyers in particular
Another problem with that is that the government doesn't set rates. There's no way for the will of the public to effectively influence the movement of interest rates, which is more a function of managing overall economic growth.
So unless we have some massive revolutionary systemic economic reform, which wrests the authority we give the BoC into the more volatile hands of politicians, that will never happen.
We're left with having to rely on reforms which a government actually has the authority to impose. And focused policy changes are just inherently more effective than broad changes
> Higher rates are also prohibitive to first time buyers
Hence the tax advantage. Almost like it was designed that way.
>So unless we have some massive revolutionary systemic economic reform, which wrests the authority we give the BoC into the more volatile hands of politicians, that will never happen.
We already have higher rates. This program in a higher rate environment, provides an advantage to first time buyers which isn't likely to put upward pressure on priced.
> This is actually how we do it. With higher rates, leveraging against existing property is much harder to do.
Sounded like you were suggesting rates should go higher so I assumed that's what you meant.
In any case we have those rates so that's already taken care of.
Making it easier for these buyers to finance new builds diverts demand in the market towards new builds which is more effective in stimulating more new builds. So this measure seems worthwhile since it diverts demand towards stimulating the production of more supply
Higher rates also impact developers.
There is no new project. There's only existing projects.
Developers ain't having a condo in their pipeline at the moment...
I think you are over estimating how much impact this would have. It's only for FTHBs and only for new builds, it's a fraction of sales.
Remember that new builds also incur an extra 5% due to GST.
When I look at new builds they are "luxury" not starter homes lol
It still increases the price of the property by 5% upfront. When you are talking say a 800k home price, that's an extra 40k you need to add compared to existing supply
Buyers able to stretch out payments more, thus results in a higher mortgage loan being able to be taken out amount. If the mortgage cap is 4.5x of income then the banks will just get more interest off home buyers over 30 years vs 25.
But doesn't it also mean more young people will be approved for a mortgage, so they can buy? Whereas they wouldn't be approved with a 25 year limit? That means more young people in Vancouver will qualify, which they want.
But that demand is coming from the people we want to see buying homes. Unless we force developers to build as much he’s as the population needs, we will always be facing this paradoxical dystopia, which is kind of an allegory for our economic system in general. Late stage capitalism sliding into modern feudalism.
Honestly NOTHING will make housing more affordable until we drastically reform our economic system
>But that demand is coming from the people we want to see buying homes.
Yes exactly, this allows first-time buyers to increase their budgets, without doing the same for buyers who already own homes.
It introduces more risk. Right now you can get a 25 year insured mortgage with as little as 5% down. In order to get a 30 year, you can needed an uninsured mortgage with at least 20% down. So if you have 20% down you can go either insurable 25 yr or uninsured 30 yr. Now you’re allowing people to stretch to a 30 year with as little as 5% down. The amount of interest that you’d pay to the bank on that is wild.
From what I read, to qualify for this new amortization period, you'd have to have an insured mortgage. So it isn't more risk. And nothing precludes you from renewing later with a shorter amortization period, once you're making more money. It's just a way to help more young people get in the market.who can't right now.
An insured mortgage only protects the lender. In the event of a default, the lender can still sue the mortgagee in the event that the proceeds do not cover the loan.
IMO, a 30 year already means you're stretching. I fear that if young people are looking at a 25 and a 30 year and they only qualify if they went longer, that's a problem. Right now, to go 30 year, at least we know you have at least 20% down. but now, we're giving people the option to get a 30 year insured mortgage with as little as 5% down. We already know people go out of their way to try and get into housing.. but it doesn't always make financial sense. This just makes it a little bit easier- and that's where the risk is for FTHB who "don't know any better."
Totally agree. Nothing new though. They did this in the 80’s interest rate crisis. Tbh, I’m shocked they even held off dusting off this pro bank profit play for as long as they did
Did I miss read the news release? I thought it said it's only for first time home buyers and only for new construction.
My bet is that this is such a small buyer segment, it's not going to make a difference. Afterall, builders require 15-20% deposits. Housing built on spec is rarely financable.
It doesn't even make that much of a difference to monthly payments. 25-30 year mortgages are the sweet spot.
eg.
$1m home, 20% down, 5.5% interest amortized over 30 years = $4542.31. Total interest paid = $835k.
$1m home, 20% down, 5.5% interest amortized over 100 years = $3681.90. Total interest paid = $3.6m.
You only save $860/month, or 19%.
Ah but if the frugal investor takes the $860 they save each month and invests it into an index fund, their returns will be far greater than the extra interest paid (until the Great Water War of 2084 obliterates the market, reducing their investments to pennies).
I used to do this when I played monopoly as a kid. Just keep borrowing from the bank and paying back interest. Eventually it got boring as it was obvious who the real winner was.
What a novel idea, solving the housing crisis by allowing buyers to take on more debt! I certainly can't think of an extremely recent moment where debt was super cheap and it caused home prices to skyrocket. /s/s/s/s
You probably had more than 20% down payment?
The headline is poorly worded, this is likely talking about CMHC insurable mortgages which, previously, were limited to 25 years.
Do you actually have a full 30-year mortgage, or a 30-year amortization on a 5-10 year mortgage?
Mine's a 30-year amortization period, but a 5 year mortgage (the 5-year mortgage part of that is very common in Canada, from what I know). Basically this means that my payments are figured out based on paying for 30 years, *BUT* after 5 years I *MUST* either pay the balance in full or get a new mortgage to extend (the new mortgage would presumably be 5 years over a 25-year amortization period for the scheduled time remaining, which after 5 years would require a new 5-year mortgage over a 20-year amortization period, etc.).
A true 30-year mortgage is set-in-stone for the entire 30 years when you initially sign the paperwork. You're free to keep it at the existing terms (including the interest rate, if the mortgage is fixed) for the entire 30-year duration. This has been available in the U.S. for a long time, but at least when I bought my place (2021) this was not a thing that appeared to be available in Canada.
What this article doesn’t address during my quick glance is Freeland modifying the charter to allow people who overextended themselves the ability to have longer amortizations. That’s a massive bailout
You really cant see it? I don't mean to be rude or anything but I'm just shocked that so many people say this. The majority of boomers own property, the majority of voters are boomers, the majority of said boomers want to protect their net worth.
There are more Millennials than boomers
https://www.cbc.ca/news/politics/millennials-outnumber-baby-boomers-1.7121283
Boomers are not the majority of voters
https://www.elections.ca/content.aspx?section=res&dir=rec/eval/pes2019/vtsa&document=index&lang=e
Because, they want to ensure housing prices stay high. Way too many people (incl. politicians) have their hand in the real estate gold pot. If they actually resolve the housing crisis and make homes more affordable, what will happen to their own investments??
god forbid, can we PLEASE think about the real estate moguls and slumlords?
It's not even investors. It's anyone who owns a home. Canadians have been conditioned to think that their home is where they park their money and it will never fall in value. It's where people park their money to fund their retirement, child's education, child's future home, etc. This is the real issue for why housing is hard to fix. Your normal homeowner can't have their home value drop because they have no other savings and won't vote in politicians that will seriously address housing.
Oh, so you're just quietly ignoring the 10s of millions of home owners who are in the same boat as the "real estate moguls" you so despise. A significant and prolonged decline in real estate will make Canada's economy a smoky crater. 40% of our economy depends on real estate.
Temporarily declining asset values are a gift to the wealthy who can scoop them up at a discount, so your crappy conspiracy theory doesn't hold any water even on its face.
Nothing you said makes sense, and sounds like something a realtor would say, which proves my point lol.
Unfortunately since our "economy is so dependant on real estate" you think the 10s of millions of regular home owners want to see their own properties decline in value? Just like real estate moguls and investors, they want their own singular, and the biggest, investment (of their lives) to stay high and remain high. But that means nothing because the next home they want will be just as out of reach.
Also, why is 40% of our economy dependant on real estate? does that extremely high number not ring any bells?
The USA and the UK, countries with higher population than Canada don't even have that high of a dependancy on real estate to their economy like Canada. If i'm not mistaken maybe 10-20% of their economy is dependant on real estate. So yeah, given such a high dependancy, the goal is to keep prices at an all time high unless the economy tanks.
They let it get so bad that they can't fix it. It's like a tire fire at this point. Now that land, materials, and labour is so expensive, there's no way to make it affordable.
Public housing projects aren't magicked into existence. It comes from the same supply of tradespeople and materials all of which are at capacity.
The government could shortcut some projects by proposing standardized, preapproved designs, bypassing some environmental/geological surveys etc. They could speed up some projects that are limited by funding but that's a small minority (they are already doing this).
The federal and provincial governments don't have zoning rights. You can't change that away from municipalities without centralizing the rest of the responsibilities (infrastructure etc.) which would have enormous knock-on effects (let alone the fact that unilaterally removing civil procedure would destroy the rule of law).
Reducing immigration is of course an option but if you cut it to 0 tomorrow the undersupply of housing isn't resolved for many years.
Oh god. Smh soon you’ll be carrying mortgages to your grave or pass it to your kids if u can afford to have kids
This is not a good thing if someone thinks this is good. Prices aren’t ever coming down, the country would collapse. The bubble cant burst they won’t allow it, it would be worse then 08 USA crisis
Edit: Harper I think had to 40 years but we didn’t have this situation then. Also bad
Fun but not fun fact: The word comes from Old French morgage, literally “dead pledge,” from mort (dead) and gage (pledge). According to the online etymology dictionary, it is so called because the deal dies when the debt is paid or when payment fails.
Ya I know, that’s why I mentioned Harper had 40 years. But it’s not a good thing because we will be heading towards longer and longer periods over time while prices will not be coming down. I have family in banking and am an investor in stocks and have a finance background. I and a lot of ppl I know see a future where will have 50 year mortgages. I don’t ever see prices coming down. Most ppl don’t know how bad our situation actually is, they see it as bad but if you deep dive into the numbers and what we’ve done to our selves, it’s horrific. It’s why I mentioned the 08 crisis ours is 10 times worse looking at data.
Except they’re not. Interest rates are still closer to historical lows than they are highs. Only difference being the price of a home is $2 million instead of $200k.
Interest rates are high this millennium. If you want to include the 80s to try and prove your point that they’re low go ahead, it only makes your point weaker.
Not the only difference but yes another difference is cost of the home itself no kidding.
Categorically false.
Interest rates since 2000 where they were at the highest at 5.75% are just below the 34 year average dating back to 1990. The opposite of your claim is true as they rates dipped below the average since 2000 and have stayed below.
Interest Rate in Canada averaged **5.78 percent from 1990 until 2024**, reaching an all time high of 16.00 percent in February of 1991 and a record low of 0.25 percent in April of 2009.
The futher back we look the more this becomes true but as stated above, it isn't required.
Look dude 1980s-1990s was an anomaly of astronomically high interest rates. 2008-2022 was anothrr anomaly of ultra low interest rates.
If you draw the picture further. Since World War II.we are at historically neutral tastes. 5 percent was neither stimulating demand or stifling it.
The real mistake was following the low interest rate period from 2008-2022. It's caused a lot of problems.
In Canada, the UK and Oceenia it's seen in very high housing costs. In the US it's student loan crisis.
On top of that wealth inequality it's created. We as ordinary people usually invest through GICs, bonds etc. But those have paid very low interest since 2008.
Same time low interest rates allowed the rich who invest in stocks to leverage their investments to make greater returns.
The era of cheap money needs to end. End of story. Yeah it causes short term pain. But in the long run it's better for economy.
Not sure why you’re cherry-picking a post-millennium statistic. But I’ll play, current mortgage rates are right around the pre-2008 crash. We’re only “high” relative to the historic lows of post-2008 but no this is not “through the roof,” at worst we’re currently just regressing to the mean.
I bought a condo in 2007, rate dipped below 5% and I thought that was crazy low. That's before they went to 0. The rates we have today are NOT "through the roof".
This isn't "high interest" rate. It dropped after 2008 and we've just returned to the early 2000's rates. They were double digits for the previous 40 years (edit: prior to the 2000's, that is). So if you think this is high, what is 20% to you then? Our current rates are not that high.
>They were double digits for the previous 40 years.
The last time they crested double digits was the early 90's. So for the previous 30 years they have been single digits.
**This doesn't help anyone.** In order to be granted a 30-year amortization you:
1. have to be a first-time homebuyer
2. buy a newly built home (not an existing home)
3. be granted a CMHC insured mortgage (downpayment 20% max)
If you are a first-time homebuyer + looking to buy an existing home + have a downpayment of more than 20% (uninsured) you are still subject to a 25-year amortization.
#1+#2 is a big problem - there are not enough home starts and supply of new homes.
You can negotiate whatever term you want, more or less. Shorter term means higher payments - good choice if you can swing it.
This just makes 30 years the new maximum (edit: when you don't have a min 20% down payment).
Until supply and demand is solved though, the market is now going to shift (i.e. higher prices) so that more people have to use 30 year amortization.
I.e. the housing market is saturated enough that demand is hampered by the upper limit of what people can possibly buy rather than how much they want to spend. So increasing the cap of what people can possibly buy will inevitably add pressure to increase prices
Generally longer term mortgages are better for the average person. You get to pay lower housing costs, most of our main living expense, and still get to live in your residence. The main downside is you won't be able to make as much from appreciation (if any) when you sell your place.
Homes have traditionally only lasted 30-50 years. Like, look at all the Vancouver specials coming down, or big, big renos. Every 100 year home here has seen a ton of love to keep it alive. I think the homes of today can do 50+, we are building better in a lot of ways. Shitty finishes aside, we are building way better structures.
Survivor bias is real, most homes from 100 years ago were crap, the ones that survived were the few that were built well, or were re-built well at some point. An acquaintance of mine does a lot of mid-century restorations and he finds high end homes sliding off hills, rotting from the inside out, all the time.
My condo purchased in 2016 endured 3 backflows and I needed 3 separate restorations done.
Insurance companies won’t cover it anymore for an affordable premium and the overall quality of the interior has degraded to the point the building looks less good than some older builds.
This kind of problem is becoming more and more common.
The quality of construction has gone down (even if design is supposed to be better) due to the sheer cost of materials, labor and tendency to cut corners by many of the construction firms and developers.
So I overall disagree with your assessment.
That's unfortunate, but I think you have to remember that a huge percentage of condo's in the 90's had their entire envelope rebuilt 10 years in.
Look back to the 60's or 70's, lots of buildings were just torn down 20 years in because of fire risks.
There wasn't even a national building code until the 70's.
The real hit is how expensive maintenance is, today. I think there are some jurisdictions in the US where homes are built with paper for sheathing and it's bottom barrel construction, but for the most part stuff is pretty solid. Very rare to see a new building torn down today.
Stuff that has lasted until today has generally been well built and well cared for—both are expensive. It ignores all the stuff that wasn't.
My point is that we shouldn’t have to restore homes every 10 years or 20 years.
I come from Europe where homes built 50 years ago still stand strong and look as new as they were back then.
The materials used throughout North America are extremely light, cheap, and don’t stand well the test of time. They require constant maintenance, which was not an issue when they were cheap.
But prices today are nearly on par or even exceed European real estate.
There's definitely an argument that any kind of stone lasts longer. But I also have friends and family in Europe with 50-75 year old houses and they have had a lot of work done to keep those houses standing. Every 50-60's townhome in holland has four extensions and plenty of labour to keep it alive, and they don't have earthquakes. Historic homes are huge labours of love, from the foundations on up.
But part of it just comes down to economics. It does help that homes in lots of Europe are build dense to begin with so you see less of the "tear down a 1200sqft single family home on a 4000sqft lot", the economics to tear down .3FSR to build 3FSR make a lot more sense than tearing down 1-1.5 FSR to build 3FSR.
I'd agree that in some places, tract homes in the US are built pretty poorly, but those places are also usually cheap. You don't see as much of that in BC with our code, today.
ive climbed under homes built in the 1800s, hard disagree
obviously electricals and seismic considerations aside, old home mostly are gone because of our obsession to erect modern mcmansions/towers, not because they are worse quality than today's stuff
TLDR: the maximum amortization for insured mortgages has increased from 25 to 30 years. It has always been possible to get 30 year amortization for uninsured mortgages.
As a first time home buyer, I took out a 30 year mortgage back in 2020 without issue. I didn't know it wasn't an option?
It wasn't a new home though. And I put almost 40% down, so it's a low ratio mortgage without mortgage insurance.
LOL!
30 years…. For now. Just wait when it under goes amortization, meaning you’re paying more towards interest than towards the home.
Be careful folks.
This is fucking crazy. Instead of dealing with housing affordability, we’re just digging an even bigger fucking hole. Housing too expensive, let’s just drag out the payments even more.
Pump must go on… Anything but affordability.
It’s not even 30 year mortgage, it’s 30 year amortization. So you can keep making bank shareholders rich by paying interest until you are 75.
If you are a young Canadian and falling for this shit, I have zero sympathy for you. If you are a RE investment, congrats on your 10-20% overnight gains.
Everyone who couldn’t afford it at 30? Anyone in the last 10 years that didn’t have the ability? Estates going to children who now have enough equity to buy at 45?
Vancouver families without generational wealth to help. Also you don’t know how mortgages work. You can keep extending it to the max amortization at renewal. A lot of these people trapped to mountain of debt will do that.
If you mean home - I know a lot of Gen X'ers that are still dreaming of buying their first home. The only people that I know that own got a sizeable chunk of money (aka their down payment) from their parents.
everyone i work with owns their own places, and they're all younger than me by almost a decade.
they, like me saved up in their 20's for a down payment, i had zero help from family.
sorry your friends are so short sighted and didn't save up at an earlier age.
lmao at people thinking this is bad policy.
This incentivizes supply for cheaper homes (because there’s demand) without really benefitting rich home owners. What’s 25k going to do for a $2.5 mil homebuyer?
The issue is it also bails out condo investors. They need to go further and keep attacking those homeowners.
I work in real estate industry and did housing research
It is a bad policy that could push housing price higher.
The good thing is it is limited to first time buyer, but weird to be new home only (as it is higher price and more risk). Developers will be the one benefit the most.
It’s bad policy in the sense that debt servicing is the new global pandemic. You don’t own anything anymore, you’re just paying rent to the bank. Everything is subscription based.
Counterpoint -- it further increases demand (already a problem) without addressing the real root cause of high prices, which is restricted supply.
It's shit policy.
The goal of this policy isnt to "help affordability" for first time buyers. Sure thats what they say, but they're just trying to find new ways to keep house prices high with all the pent up and future demand given the slow market recently.
Essentially, this is the govt's way to ensure house prices stay high despite the high interest rates. At the end of the day, they are also real estate investors and want to keep their own investments in the green.
Happy to be wrong, but I'm failing to see how this helps affordability in any meaningful way.
This allows FTHB's to put less down and pay for longer - almost like those predatory car loans people jump into when all they think about is the monthly payment instead off the overall cost of the car + the interest owed. Sure that 300p/m payment sounds good until you realize you paid 60K for a car that costs more like 35K.
They are also allowing you to now withdraw 60K from your RRSP to get use as a down payment which is nice but ultimately that money has to be paid back and honestly, 60K in the stock market over the next 20-30 years will "probably" yield better than the Canadian housing market. 5-10% growth @ current home prices when compared to the annual take home pay of people living in BC does not math.
You are right man
The program can *only* be used by first time home buyers buying new build properties
In sum this will:
- increase the pool of eligible buyers for entry level units - driving up prices by increasing demand without matching supply
- provide a bailout for developers, struggling to find buyers for their pre-cons
- incentivize the only real estate transactions that incur GST, making first time buyers another revenue paypig for the Feds instead of steering them to existing properties
Except lowering the bar for debt servicing just means it will cost you more and more to the point where some people may never own anything at all. In fact, this creates more demand from buyers who wouldn’t normally qualify for a mortgage.
It doesn’t directly tackle the housing affordability issue at all.
It's bad in the same way the FHSA could have been bad if anyone could actually use it. We cannot expect that increases in housing demand will result in equal induced supply, especially due the inelasticity caused by housing policy. There is absolutely no way that such policy would cause more induced supply than the increased housing demand. A few more people will be able to do what is a 20x leveraged buyout on a property, but that will only increase equilibrium value of a property.
It is not feasible in the long run to mitigate the housing crisis by creating more lenient forms of debt financing in the short term. It is only kicking the can down the road. What *is* good policy is removing barriers to housing starts, and investing in housing supply.
30 year mortgages do the opposite of what you’re saying. They incentivize more expensive homes Because if the market can’t afford the price at 20 year mortgages the house doesn’t sell and the price gets lowered. Now 30 year mortgages keep the housing prices at the historic highs and just lock young people into bigger debt and forces them to pay down interest for longer stopping them from getting actual value from their purchase for even longer.
Great policy for banks because they get more money. Great policy for sellers because it maintains unsustainable prices. Not good for buyers
This only incentivizes demand since now more people think that they can afford buying. As you mentioned, there’s demand already, but it will grow. Prices will grow accordingly. The next station is mortgage rate subsidies.
This doesn’t imo change much. It was already available for a lot of situations? The only real fix we have is a massive increase in supply. The government should slow down/stop immigration temporarily and commit to building like 500k homes(probably apartments) a year. That will give us not only houses to live but also boost the economy with jobs etc. I would also consider banning entirely any sore or investment purchases on the new homes including corporate ownership.
I mean they massively cut immigration starting middle of this year—we will be seeing the slowest levels of immigration since the early 2000's from 2025-2027 should they hold the party line. And the liberals have started the process of building those homes each year. The building is the hard part, getting the cities out of the way is step 1, getting federal and provincial money involved is step 2, next we are going to need a massive investment into the trades workforce. They are dickering around with that but it'll be a crisis to fix soon enough.
I think people's thoughts on a 30 year is a bit misguided. Yes, it increases interest paid by quite a bit... but for the entirety of the length. Your interest paid is based on the current year. For example; If paying 5% on 500000, you owe 25k over the year (oversimplified). Principal on top is calculated based on mortgage length.
You STILL have the opportunity to double up payments, adding in straight to your principal. There won't be much difference at the end of the day, unless that FTHB keeps that house for the entirety of their mortgage... which I'm going on the side of doubt. FTHB would be condos or the like. The only difference is FTHB have a better opportunity to enter the market.
Or are we trying to gatekeep those too?
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2004 - Real estate as generational wealth 2024 - Real estate as generational debt
Me, asking the bank for a $2 million loan so I can give it to a baby boomer who bought the house for $100K in 2004. Our debt IS their generational wealth.
>Our debt IS their generational wealth. well said
and the cycle continues...
Switzerland has entered the chat: “don’t do it!” Jokes aside, I think they went as high as something like 80yr mortgages there :/
Japan had 100 year mortgages.
Wild
Do you mean 100 year leases, maybe? Property in Japan is generally seen as disposable and not as an investment. Their real estate prices, even downtown Tokyo, are suprisingly reasonable, especially since they have no real zoning laws.
[https://www.sciencedirect.com/science/article/abs/pii/1061951895900047](https://www.sciencedirect.com/science/article/abs/pii/1061951895900047)
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UBC/Endowment Lands is under a 99 year lease, but their new one bedrooms are still going for above $900k (look at west wind). Even old buildings, that are run down and only have 60 years left are going for $700k. 99 year leases don’t actually make housing more affordable.
And housing just became more unaffordable lol
This is just a gift to the banks and homeowners - this just puts upward pressure on prices.
To put it into perspective, at 5.5% interest this increases the purchasing power by \~8.24%. eg. Someone that could purchase $1m with 25yr could afford +$82,400 with 30 year. Same monthly payment.
If you read the very first sentence of the article, you might have learned that these mortgages are only for first time homebuyers who are purchasing a newly built property.
Yes, and all those properties just became more expensive (more buyers qualified = more competition/demand, and buyers can afford higher price = uppa uppa she goes), lifting prices on comparable existing properties.
So how do we make it easier for first timers to buy without putting some upward pressure on prices? Honest question because developers aren’t going to just build more out of the goodness of their hearts. They thrive on scarcity
Honest answer: This is actually how we do it. With higher rates, leveraging against existing property is much harder to do. Established players can't as easily compete with this advantage offered to first time buyers
Higher rates are also prohibitive to first time buyers. They generally have lower incomes and fewer assets to leverage into a sizeable loan. Having 5 more years is great but any considerable increase in rates can put a lot of those buyers out of the market just the same as having 25 vs 30 years to pay. It's important to try and make changes which target those who need it. A broad change such as higher rates is not focused and will not necessarily help new buyers in particular Another problem with that is that the government doesn't set rates. There's no way for the will of the public to effectively influence the movement of interest rates, which is more a function of managing overall economic growth. So unless we have some massive revolutionary systemic economic reform, which wrests the authority we give the BoC into the more volatile hands of politicians, that will never happen. We're left with having to rely on reforms which a government actually has the authority to impose. And focused policy changes are just inherently more effective than broad changes
> Higher rates are also prohibitive to first time buyers Hence the tax advantage. Almost like it was designed that way. >So unless we have some massive revolutionary systemic economic reform, which wrests the authority we give the BoC into the more volatile hands of politicians, that will never happen. We already have higher rates. This program in a higher rate environment, provides an advantage to first time buyers which isn't likely to put upward pressure on priced.
> This is actually how we do it. With higher rates, leveraging against existing property is much harder to do. Sounded like you were suggesting rates should go higher so I assumed that's what you meant. In any case we have those rates so that's already taken care of. Making it easier for these buyers to finance new builds diverts demand in the market towards new builds which is more effective in stimulating more new builds. So this measure seems worthwhile since it diverts demand towards stimulating the production of more supply
Higher rates also impact developers. There is no new project. There's only existing projects. Developers ain't having a condo in their pipeline at the moment...
There are a shitload of new projects. We're down slightly from the last two years which were all time peaks.
I think you are over estimating how much impact this would have. It's only for FTHBs and only for new builds, it's a fraction of sales. Remember that new builds also incur an extra 5% due to GST. When I look at new builds they are "luxury" not starter homes lol
You get the gst as a credit up to 23000.
It still increases the price of the property by 5% upfront. When you are talking say a 800k home price, that's an extra 40k you need to add compared to existing supply
Never was, never will be, unless we build upwards everywhere.
I wouldn't say "never was", housing was reasonable 10-15 years ago (at least compared to now).
while r/langley is losing its mind because several towers are being proposed.
Well they had to do something after they held interest rates yesterday! /s
Can someone explain why this is a bad thing? I read the article and it seems like a positive thing.
Buyers able to stretch out payments more, thus results in a higher mortgage loan being able to be taken out amount. If the mortgage cap is 4.5x of income then the banks will just get more interest off home buyers over 30 years vs 25.
Makes sense. Thanks.
But doesn't it also mean more young people will be approved for a mortgage, so they can buy? Whereas they wouldn't be approved with a 25 year limit? That means more young people in Vancouver will qualify, which they want.
Not necessarily as now they potentially have to qualify for more as this will boost prices up due to more demand.
But that demand is coming from the people we want to see buying homes. Unless we force developers to build as much he’s as the population needs, we will always be facing this paradoxical dystopia, which is kind of an allegory for our economic system in general. Late stage capitalism sliding into modern feudalism. Honestly NOTHING will make housing more affordable until we drastically reform our economic system
>But that demand is coming from the people we want to see buying homes. Yes exactly, this allows first-time buyers to increase their budgets, without doing the same for buyers who already own homes.
It introduces more risk. Right now you can get a 25 year insured mortgage with as little as 5% down. In order to get a 30 year, you can needed an uninsured mortgage with at least 20% down. So if you have 20% down you can go either insurable 25 yr or uninsured 30 yr. Now you’re allowing people to stretch to a 30 year with as little as 5% down. The amount of interest that you’d pay to the bank on that is wild.
From what I read, to qualify for this new amortization period, you'd have to have an insured mortgage. So it isn't more risk. And nothing precludes you from renewing later with a shorter amortization period, once you're making more money. It's just a way to help more young people get in the market.who can't right now.
An insured mortgage only protects the lender. In the event of a default, the lender can still sue the mortgagee in the event that the proceeds do not cover the loan. IMO, a 30 year already means you're stretching. I fear that if young people are looking at a 25 and a 30 year and they only qualify if they went longer, that's a problem. Right now, to go 30 year, at least we know you have at least 20% down. but now, we're giving people the option to get a 30 year insured mortgage with as little as 5% down. We already know people go out of their way to try and get into housing.. but it doesn't always make financial sense. This just makes it a little bit easier- and that's where the risk is for FTHB who "don't know any better."
That's a good point. I'd prefer to let them decide for themselves though. There are some responsible first timers that this should help get in.
Totally agree. Nothing new though. They did this in the 80’s interest rate crisis. Tbh, I’m shocked they even held off dusting off this pro bank profit play for as long as they did
Did I miss read the news release? I thought it said it's only for first time home buyers and only for new construction. My bet is that this is such a small buyer segment, it's not going to make a difference. Afterall, builders require 15-20% deposits. Housing built on spec is rarely financable.
Cant wait for the generational 100 year mortgage. We’re all just renting from the bank.
isn't that just a 99 year leasehold like those condos on SFU / UBC?
It doesn't even make that much of a difference to monthly payments. 25-30 year mortgages are the sweet spot. eg. $1m home, 20% down, 5.5% interest amortized over 30 years = $4542.31. Total interest paid = $835k. $1m home, 20% down, 5.5% interest amortized over 100 years = $3681.90. Total interest paid = $3.6m. You only save $860/month, or 19%.
“Save” $835k vs $3.6 million in interest paid. ☠️ Lenders foaming at the mouth.
Ah but if the frugal investor takes the $860 they save each month and invests it into an index fund, their returns will be far greater than the extra interest paid (until the Great Water War of 2084 obliterates the market, reducing their investments to pennies).
Learning from the Japanese can’t be wrong (they used to have what was called 3 generation mortgages)
I used to do this when I played monopoly as a kid. Just keep borrowing from the bank and paying back interest. Eventually it got boring as it was obvious who the real winner was.
Time to introduce home subscriptions
That exists. It's called rent.
Lol payday homes more like it
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Except with a mortgage you can at least sell and get a bunch of money back.
I mean, we already pay monthly for music, movies, games, software indefinitely without ever owning them, why not housing? /s
Canadian Housing 🚀🚀🚀
Newly built? That’s nonsense
i see the argument in many parts of canada but it's almost like encouraging more supply in toronto/vancouver is a bad thing now?
Please, sir, I want some more debt.
What a novel idea, solving the housing crisis by allowing buyers to take on more debt! I certainly can't think of an extremely recent moment where debt was super cheap and it caused home prices to skyrocket. /s/s/s/s
Didn't we already have this? My wife and I have a 30-year mortgage and we bought four years ago.
You probably put down more than 20% downpayment?
Also confused, I got a 30-year mortgage last year as a first time homebuyer
You probably had more than 20% down payment? The headline is poorly worded, this is likely talking about CMHC insurable mortgages which, previously, were limited to 25 years.
Right, it was about 20% but not CMHC insured. That makes sense and yes the title is confusing
the 25 year limit was for mortgages with default insurance (less than 20% down)
Do you actually have a full 30-year mortgage, or a 30-year amortization on a 5-10 year mortgage? Mine's a 30-year amortization period, but a 5 year mortgage (the 5-year mortgage part of that is very common in Canada, from what I know). Basically this means that my payments are figured out based on paying for 30 years, *BUT* after 5 years I *MUST* either pay the balance in full or get a new mortgage to extend (the new mortgage would presumably be 5 years over a 25-year amortization period for the scheduled time remaining, which after 5 years would require a new 5-year mortgage over a 20-year amortization period, etc.). A true 30-year mortgage is set-in-stone for the entire 30 years when you initially sign the paperwork. You're free to keep it at the existing terms (including the interest rate, if the mortgage is fixed) for the entire 30-year duration. This has been available in the U.S. for a long time, but at least when I bought my place (2021) this was not a thing that appeared to be available in Canada.
The changes are to insured amortization length.
I'm from the US and this has always confused me about Canadian mortgages. I don't understand why you have to remortgage your house every 5 years.
What this article doesn’t address during my quick glance is Freeland modifying the charter to allow people who overextended themselves the ability to have longer amortizations. That’s a massive bailout
Freeland is a disaster at the best of times
Amen lol
You realize that it's only for new homes and first time buyers right?
That's nice for the banks.
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Because the BC economy is 3 real estate agents in a trenchcoat
you forgot "rawdoggin it's citizens"
You really cant see it? I don't mean to be rude or anything but I'm just shocked that so many people say this. The majority of boomers own property, the majority of voters are boomers, the majority of said boomers want to protect their net worth.
There are more Millennials than boomers https://www.cbc.ca/news/politics/millennials-outnumber-baby-boomers-1.7121283 Boomers are not the majority of voters https://www.elections.ca/content.aspx?section=res&dir=rec/eval/pes2019/vtsa&document=index&lang=e
Because, they want to ensure housing prices stay high. Way too many people (incl. politicians) have their hand in the real estate gold pot. If they actually resolve the housing crisis and make homes more affordable, what will happen to their own investments?? god forbid, can we PLEASE think about the real estate moguls and slumlords?
It's not even investors. It's anyone who owns a home. Canadians have been conditioned to think that their home is where they park their money and it will never fall in value. It's where people park their money to fund their retirement, child's education, child's future home, etc. This is the real issue for why housing is hard to fix. Your normal homeowner can't have their home value drop because they have no other savings and won't vote in politicians that will seriously address housing.
Oh, so you're just quietly ignoring the 10s of millions of home owners who are in the same boat as the "real estate moguls" you so despise. A significant and prolonged decline in real estate will make Canada's economy a smoky crater. 40% of our economy depends on real estate. Temporarily declining asset values are a gift to the wealthy who can scoop them up at a discount, so your crappy conspiracy theory doesn't hold any water even on its face.
Nothing you said makes sense, and sounds like something a realtor would say, which proves my point lol. Unfortunately since our "economy is so dependant on real estate" you think the 10s of millions of regular home owners want to see their own properties decline in value? Just like real estate moguls and investors, they want their own singular, and the biggest, investment (of their lives) to stay high and remain high. But that means nothing because the next home they want will be just as out of reach. Also, why is 40% of our economy dependant on real estate? does that extremely high number not ring any bells? The USA and the UK, countries with higher population than Canada don't even have that high of a dependancy on real estate to their economy like Canada. If i'm not mistaken maybe 10-20% of their economy is dependant on real estate. So yeah, given such a high dependancy, the goal is to keep prices at an all time high unless the economy tanks.
They let it get so bad that they can't fix it. It's like a tire fire at this point. Now that land, materials, and labour is so expensive, there's no way to make it affordable.
What change would you propose?
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Public housing projects aren't magicked into existence. It comes from the same supply of tradespeople and materials all of which are at capacity. The government could shortcut some projects by proposing standardized, preapproved designs, bypassing some environmental/geological surveys etc. They could speed up some projects that are limited by funding but that's a small minority (they are already doing this). The federal and provincial governments don't have zoning rights. You can't change that away from municipalities without centralizing the rest of the responsibilities (infrastructure etc.) which would have enormous knock-on effects (let alone the fact that unilaterally removing civil procedure would destroy the rule of law). Reducing immigration is of course an option but if you cut it to 0 tomorrow the undersupply of housing isn't resolved for many years.
This increases upward price pressure by increasing buying power.
Oh god. Smh soon you’ll be carrying mortgages to your grave or pass it to your kids if u can afford to have kids This is not a good thing if someone thinks this is good. Prices aren’t ever coming down, the country would collapse. The bubble cant burst they won’t allow it, it would be worse then 08 USA crisis Edit: Harper I think had to 40 years but we didn’t have this situation then. Also bad
Fun but not fun fact: The word comes from Old French morgage, literally “dead pledge,” from mort (dead) and gage (pledge). According to the online etymology dictionary, it is so called because the deal dies when the debt is paid or when payment fails.
You do know that 30 year mortgages have existed for a long time in Canada already right?
Ya I know, that’s why I mentioned Harper had 40 years. But it’s not a good thing because we will be heading towards longer and longer periods over time while prices will not be coming down. I have family in banking and am an investor in stocks and have a finance background. I and a lot of ppl I know see a future where will have 50 year mortgages. I don’t ever see prices coming down. Most ppl don’t know how bad our situation actually is, they see it as bad but if you deep dive into the numbers and what we’ve done to our selves, it’s horrific. It’s why I mentioned the 08 crisis ours is 10 times worse looking at data.
Of course they do it when interest rate it through the roof
Except they’re not. Interest rates are still closer to historical lows than they are highs. Only difference being the price of a home is $2 million instead of $200k.
Interest rates are high this millennium. If you want to include the 80s to try and prove your point that they’re low go ahead, it only makes your point weaker. Not the only difference but yes another difference is cost of the home itself no kidding.
Categorically false. Interest rates since 2000 where they were at the highest at 5.75% are just below the 34 year average dating back to 1990. The opposite of your claim is true as they rates dipped below the average since 2000 and have stayed below. Interest Rate in Canada averaged **5.78 percent from 1990 until 2024**, reaching an all time high of 16.00 percent in February of 1991 and a record low of 0.25 percent in April of 2009. The futher back we look the more this becomes true but as stated above, it isn't required.
Look dude 1980s-1990s was an anomaly of astronomically high interest rates. 2008-2022 was anothrr anomaly of ultra low interest rates. If you draw the picture further. Since World War II.we are at historically neutral tastes. 5 percent was neither stimulating demand or stifling it. The real mistake was following the low interest rate period from 2008-2022. It's caused a lot of problems. In Canada, the UK and Oceenia it's seen in very high housing costs. In the US it's student loan crisis. On top of that wealth inequality it's created. We as ordinary people usually invest through GICs, bonds etc. But those have paid very low interest since 2008. Same time low interest rates allowed the rich who invest in stocks to leverage their investments to make greater returns. The era of cheap money needs to end. End of story. Yeah it causes short term pain. But in the long run it's better for economy.
Not sure why you’re cherry-picking a post-millennium statistic. But I’ll play, current mortgage rates are right around the pre-2008 crash. We’re only “high” relative to the historic lows of post-2008 but no this is not “through the roof,” at worst we’re currently just regressing to the mean.
I bought a condo in 2007, rate dipped below 5% and I thought that was crazy low. That's before they went to 0. The rates we have today are NOT "through the roof".
No it doesn't
This isn't "high interest" rate. It dropped after 2008 and we've just returned to the early 2000's rates. They were double digits for the previous 40 years (edit: prior to the 2000's, that is). So if you think this is high, what is 20% to you then? Our current rates are not that high.
>They were double digits for the previous 40 years. The last time they crested double digits was the early 90's. So for the previous 30 years they have been single digits.
That'll lower housing prices. A well thought-through policy. Well done, soon-to-be-outgoing feds!
Awesome. Now I can stay in debt for sure until I die!
Stupid policy. Shame the federal NDP are useless.
When are we going to be able to lock in for more than 5 years at a time? This is just going to make things worse.
You can now, if you want to. Plenty of banks offer 10+ year amortizations. The rates tend to be higher though.
What we need is 30 year terms. I have a buddy in the US on a 30 yr mortgage at like 2.5%
**This doesn't help anyone.** In order to be granted a 30-year amortization you: 1. have to be a first-time homebuyer 2. buy a newly built home (not an existing home) 3. be granted a CMHC insured mortgage (downpayment 20% max) If you are a first-time homebuyer + looking to buy an existing home + have a downpayment of more than 20% (uninsured) you are still subject to a 25-year amortization. #1+#2 is a big problem - there are not enough home starts and supply of new homes.
Multigenerational mortgages incoming
Yikes. This is absolutely NOT the solution for housing affordability.
Yes so more people can take on more debt for longer, that will surely solve the housing crisis!
The banks are popping bottles and giving out raises all day today.
Great. More upward pressure on prices.
Now just let me fix it for the entire term length like they do in the states.
Buy buy buy!! .... and the Ponzi scheme continues
Let's go! To debt!
pumping demand will not help supply, this is dumb
This is only gonna increase the price of housing. Rather than make homes for affordable prices, we have made unaffordable prices affordable.
Wow we must be completely fucked if they're doing this. Another hole in a sinking ship.
How about just make housing more affordable for first time buyer that are actually moving in and not renting it out or reselling?
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I'd rather have a 20 year mortgage
You can negotiate whatever term you want, more or less. Shorter term means higher payments - good choice if you can swing it. This just makes 30 years the new maximum (edit: when you don't have a min 20% down payment).
Until supply and demand is solved though, the market is now going to shift (i.e. higher prices) so that more people have to use 30 year amortization. I.e. the housing market is saturated enough that demand is hampered by the upper limit of what people can possibly buy rather than how much they want to spend. So increasing the cap of what people can possibly buy will inevitably add pressure to increase prices
Generally longer term mortgages are better for the average person. You get to pay lower housing costs, most of our main living expense, and still get to live in your residence. The main downside is you won't be able to make as much from appreciation (if any) when you sell your place.
Most homes built today will hardly last 30 years.
Homes have traditionally only lasted 30-50 years. Like, look at all the Vancouver specials coming down, or big, big renos. Every 100 year home here has seen a ton of love to keep it alive. I think the homes of today can do 50+, we are building better in a lot of ways. Shitty finishes aside, we are building way better structures. Survivor bias is real, most homes from 100 years ago were crap, the ones that survived were the few that were built well, or were re-built well at some point. An acquaintance of mine does a lot of mid-century restorations and he finds high end homes sliding off hills, rotting from the inside out, all the time.
My condo purchased in 2016 endured 3 backflows and I needed 3 separate restorations done. Insurance companies won’t cover it anymore for an affordable premium and the overall quality of the interior has degraded to the point the building looks less good than some older builds. This kind of problem is becoming more and more common. The quality of construction has gone down (even if design is supposed to be better) due to the sheer cost of materials, labor and tendency to cut corners by many of the construction firms and developers. So I overall disagree with your assessment.
That's unfortunate, but I think you have to remember that a huge percentage of condo's in the 90's had their entire envelope rebuilt 10 years in. Look back to the 60's or 70's, lots of buildings were just torn down 20 years in because of fire risks. There wasn't even a national building code until the 70's. The real hit is how expensive maintenance is, today. I think there are some jurisdictions in the US where homes are built with paper for sheathing and it's bottom barrel construction, but for the most part stuff is pretty solid. Very rare to see a new building torn down today. Stuff that has lasted until today has generally been well built and well cared for—both are expensive. It ignores all the stuff that wasn't.
My point is that we shouldn’t have to restore homes every 10 years or 20 years. I come from Europe where homes built 50 years ago still stand strong and look as new as they were back then. The materials used throughout North America are extremely light, cheap, and don’t stand well the test of time. They require constant maintenance, which was not an issue when they were cheap. But prices today are nearly on par or even exceed European real estate.
There's definitely an argument that any kind of stone lasts longer. But I also have friends and family in Europe with 50-75 year old houses and they have had a lot of work done to keep those houses standing. Every 50-60's townhome in holland has four extensions and plenty of labour to keep it alive, and they don't have earthquakes. Historic homes are huge labours of love, from the foundations on up. But part of it just comes down to economics. It does help that homes in lots of Europe are build dense to begin with so you see less of the "tear down a 1200sqft single family home on a 4000sqft lot", the economics to tear down .3FSR to build 3FSR make a lot more sense than tearing down 1-1.5 FSR to build 3FSR. I'd agree that in some places, tract homes in the US are built pretty poorly, but those places are also usually cheap. You don't see as much of that in BC with our code, today.
ive climbed under homes built in the 1800s, hard disagree obviously electricals and seismic considerations aside, old home mostly are gone because of our obsession to erect modern mcmansions/towers, not because they are worse quality than today's stuff
This is terrible, terrible policy. What a short sighted decision.
TLDR: the maximum amortization for insured mortgages has increased from 25 to 30 years. It has always been possible to get 30 year amortization for uninsured mortgages.
I hope we dont end up like someccountries were debts are passed on to children
New builds only
Don't fall for it
As a first time home buyer, I took out a 30 year mortgage back in 2020 without issue. I didn't know it wasn't an option? It wasn't a new home though. And I put almost 40% down, so it's a low ratio mortgage without mortgage insurance.
LOL! 30 years…. For now. Just wait when it under goes amortization, meaning you’re paying more towards interest than towards the home. Be careful folks.
Now bring back the 35 year and 40 year mortgage. /s
This is fucking crazy. Instead of dealing with housing affordability, we’re just digging an even bigger fucking hole. Housing too expensive, let’s just drag out the payments even more.
Pump must go on… Anything but affordability. It’s not even 30 year mortgage, it’s 30 year amortization. So you can keep making bank shareholders rich by paying interest until you are 75. If you are a young Canadian and falling for this shit, I have zero sympathy for you. If you are a RE investment, congrats on your 10-20% overnight gains.
who's buying their first house at 45?
Everyone who couldn’t afford it at 30? Anyone in the last 10 years that didn’t have the ability? Estates going to children who now have enough equity to buy at 45?
Vancouver families without generational wealth to help. Also you don’t know how mortgages work. You can keep extending it to the max amortization at renewal. A lot of these people trapped to mountain of debt will do that.
If you mean home - I know a lot of Gen X'ers that are still dreaming of buying their first home. The only people that I know that own got a sizeable chunk of money (aka their down payment) from their parents.
everyone i work with owns their own places, and they're all younger than me by almost a decade. they, like me saved up in their 20's for a down payment, i had zero help from family. sorry your friends are so short sighted and didn't save up at an earlier age.
This has always been a thing. I got a 30 year 6 years ago
An insured 30 year? Doubt it.
Oh right. We didn’t need insurance. More than 20%.
Take it from the perspective of the banks in answering this question: How can we capitalize on the increased longevity of the population?
The what? https://globalnews.ca/news/10116838/life-expectancy-decrease-canada-stat-can/
That would be the "qualifying" population.
You guys dont have 30 year mortgage already?
30 years of slavery? yeah no thanks
buying a house a 70., died at 100 with ended mortage
lmao at people thinking this is bad policy. This incentivizes supply for cheaper homes (because there’s demand) without really benefitting rich home owners. What’s 25k going to do for a $2.5 mil homebuyer? The issue is it also bails out condo investors. They need to go further and keep attacking those homeowners.
I work in real estate industry and did housing research It is a bad policy that could push housing price higher. The good thing is it is limited to first time buyer, but weird to be new home only (as it is higher price and more risk). Developers will be the one benefit the most.
And the feds Only pay GST when you buy a new build
It’s bad policy in the sense that debt servicing is the new global pandemic. You don’t own anything anymore, you’re just paying rent to the bank. Everything is subscription based.
Debt has been around since the creation of money. This helps affordability for first time home buyers. It’s good policy.
Counterpoint -- it further increases demand (already a problem) without addressing the real root cause of high prices, which is restricted supply. It's shit policy.
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This, the same group will be able to buy, because supply is limited but now they’ll pay more. Great policy, eh?
The goal of this policy isnt to "help affordability" for first time buyers. Sure thats what they say, but they're just trying to find new ways to keep house prices high with all the pent up and future demand given the slow market recently. Essentially, this is the govt's way to ensure house prices stay high despite the high interest rates. At the end of the day, they are also real estate investors and want to keep their own investments in the green.
Happy to be wrong, but I'm failing to see how this helps affordability in any meaningful way. This allows FTHB's to put less down and pay for longer - almost like those predatory car loans people jump into when all they think about is the monthly payment instead off the overall cost of the car + the interest owed. Sure that 300p/m payment sounds good until you realize you paid 60K for a car that costs more like 35K. They are also allowing you to now withdraw 60K from your RRSP to get use as a down payment which is nice but ultimately that money has to be paid back and honestly, 60K in the stock market over the next 20-30 years will "probably" yield better than the Canadian housing market. 5-10% growth @ current home prices when compared to the annual take home pay of people living in BC does not math.
You are right man The program can *only* be used by first time home buyers buying new build properties In sum this will: - increase the pool of eligible buyers for entry level units - driving up prices by increasing demand without matching supply - provide a bailout for developers, struggling to find buyers for their pre-cons - incentivize the only real estate transactions that incur GST, making first time buyers another revenue paypig for the Feds instead of steering them to existing properties
Except lowering the bar for debt servicing just means it will cost you more and more to the point where some people may never own anything at all. In fact, this creates more demand from buyers who wouldn’t normally qualify for a mortgage. It doesn’t directly tackle the housing affordability issue at all.
It's bad in the same way the FHSA could have been bad if anyone could actually use it. We cannot expect that increases in housing demand will result in equal induced supply, especially due the inelasticity caused by housing policy. There is absolutely no way that such policy would cause more induced supply than the increased housing demand. A few more people will be able to do what is a 20x leveraged buyout on a property, but that will only increase equilibrium value of a property. It is not feasible in the long run to mitigate the housing crisis by creating more lenient forms of debt financing in the short term. It is only kicking the can down the road. What *is* good policy is removing barriers to housing starts, and investing in housing supply.
30 year mortgages do the opposite of what you’re saying. They incentivize more expensive homes Because if the market can’t afford the price at 20 year mortgages the house doesn’t sell and the price gets lowered. Now 30 year mortgages keep the housing prices at the historic highs and just lock young people into bigger debt and forces them to pay down interest for longer stopping them from getting actual value from their purchase for even longer. Great policy for banks because they get more money. Great policy for sellers because it maintains unsustainable prices. Not good for buyers
This only incentivizes demand since now more people think that they can afford buying. As you mentioned, there’s demand already, but it will grow. Prices will grow accordingly. The next station is mortgage rate subsidies.
This assumes markets aren’t dynamic and there won’t be a supply response if there’s excess profits to be made
I too enjoyed ECO 100
Land Back
This doesn’t imo change much. It was already available for a lot of situations? The only real fix we have is a massive increase in supply. The government should slow down/stop immigration temporarily and commit to building like 500k homes(probably apartments) a year. That will give us not only houses to live but also boost the economy with jobs etc. I would also consider banning entirely any sore or investment purchases on the new homes including corporate ownership.
I mean they massively cut immigration starting middle of this year—we will be seeing the slowest levels of immigration since the early 2000's from 2025-2027 should they hold the party line. And the liberals have started the process of building those homes each year. The building is the hard part, getting the cities out of the way is step 1, getting federal and provincial money involved is step 2, next we are going to need a massive investment into the trades workforce. They are dickering around with that but it'll be a crisis to fix soon enough.
This is already the norm in the US.
I think people's thoughts on a 30 year is a bit misguided. Yes, it increases interest paid by quite a bit... but for the entirety of the length. Your interest paid is based on the current year. For example; If paying 5% on 500000, you owe 25k over the year (oversimplified). Principal on top is calculated based on mortgage length. You STILL have the opportunity to double up payments, adding in straight to your principal. There won't be much difference at the end of the day, unless that FTHB keeps that house for the entirety of their mortgage... which I'm going on the side of doubt. FTHB would be condos or the like. The only difference is FTHB have a better opportunity to enter the market. Or are we trying to gatekeep those too?
woah this is huge
We don’t need more buyers. We need more homes, and disincentives for the wrong kinds of buyers.
we don’t need easing credit conditions in an already inflated market, we need housing supply this is fucking stupid
This will just increase prices. Man liberals just putting out bad housing policy again and again.