CMB MAGAZINE cmba-achc.ca spring 2016 | 9
budgetanalysis
rate and shorter term.
n
Subject only to a few exemptions, borrow-
ers need a credit score of 600 or more.
n
e maximum amortization period was
reduced from 30 years to 25 years.
* e total debt service ratio must be 44
per cent or less than income.
n
e maximum amount that borrowers can
refinance was reduced from 85 per cent to
80 per cent of the property value.
n
Rental income rules have tightened up
so that a maximum of 50 per cent of the
gross rental income can be added back to
income for high-ratio insured rentals.
n
Non-amortizing home equity lines of
credit can no longer be insured.
n
Buyers of homes which cost over
$1 million must have a minimum of
20 per cent down payment.
e 2016 Budget refers to some of these
measures and, while not implementing
anything new, states that vulnerabilities related
to housing and consumer debt will continue
to be monitored closely and the government
will implement further measures as needed.
Morneau then clearly endorses the traditional
measures adopted from the previous
Conservative government.
Canadians in certain city centres, namely
Vancouver and Toronto, are now facing sky-
rocketing housing prices, which are no longer
in sync with average incomes. Some prospective
homeowners are diligently saving their necessary
down-payment funds, only to discover that they
cannot keep up with the rising market. By the
time they have saved what they thought was a
sufficient amount, the market price may have
increased by even more than the amount of
their hard-earned down payment.
Do down-payment restrictions always
make sense in a low interest rate environment
and a rising market? Does it make sense
to stick with 25-year amortizations, when
longer amortizations can give homeowners
some financial breathing room and enable
them to afford a better quality of life? Would
concerns about a housing collapse and rising
interest rates be alleviated if we provide longer
amortizations, such as 30 years, but still qualify
borrowers based on shorter amortizations,
such as 25 years?
House prices in big cities may continue to
rise or trail off and stabilize, but one certainty
is that housing affordability challenges are likely
here to stay. Yet we find no fresh solutions from
the government to enable average Canadians
to better afford home ownership. e new
government, which has clearly taken advantage
of our low interest rate environment and
demonstrated an ability to take bold and
decisive changes of course, could have opted
for a similar approach when tackling the
issue of housing affordability.
