In October 2008 the Federal Government announced similar changes to those announced on Monday January 17th, 2011.  Prior to the changes in 2008 CMHC allowed home owners to purchase a home with as little as 0% down and with an amortization of up to 40 years.  With the most recent changes announced this Monday, the minimum down payment for a purchase is 5% and a maximum amortization of 30 years.  Some lenders including RBC have brought to market a $0 down mortgage option for well qualified buyers.

A shorter amortization is not necessarily a bad thing for our market.  Most buyers would prefer to have a shorter mortgage as the interest savings can be significant.  The impact to the market in October 2008 in my opinion was negligible.  Really, it was more of a statement to the market that the Government is taking proactive action to avoid the same challenges the US housing market has been experiencing since its sharp decline in mid 2008.

The other change announced Monday is that CMHC will no longer allow Canadians to refinance their home beyond 85% of its market value.  The previous maximum was 90% and 95% prior to October 2008.  Again, this will have very little impact to the market as most home owners prefer to borrow within 80% of their home's market value as the expense of borrowing above this level is quite high and often negates any benefits of refinancing in the first place.

Finally, the last announcement is that CMHC will no longer insure Home Equity Lines of Credit.  Very few lenders offered this product as it was seen as very high risk and often appealed to the least credit worthy of borrowers.  An applicant that needs to put down less than 20% and service only the interest in order to make cash flow work is quite high risk and CMHC's decision to no longer offer this product will likely benefit the market as a whole.

As a buyer, these recent changes will have some negative impact on a small portion of the market.  However, because these changes do not come into effect until March 18th, 2011 you'll likely see many more buyers out in the market looking for a property.  These recent CMHC changes will put a little pressure on buyers to get out there and make a decision to buy. Since if they do not, they may not have another opportunity to purchase a home at the price level they can qualify for today.

To read about all the changes and the reasons put forth by the Federal Government, please use this link:
http://www.fin.gc.ca/n11/11-003-eng.asp

If you have any questions or concerns regarding this or any other matter, please do not hesitate to contact me.

Thank you,

Jon Decaigny | Mobile Mortgage Specialist - Whistler BC | RBC Royal Bank
T. 604 935 7910 | F. 604 938 9316
#101-4000 Whistler Way, Whistler BC V0N1B4

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