Dominic Darmanin

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The New Mortgage Rules Protect the Banks and Hurt the Consumer – Again!

The New Mortgage Rules Protect the Banks and Hurt the Consumer – Again!


The New Mortgage Rules Protect the Banks and Hurt the Consumer – Again!


What's really behind the new mortgage rules?

You can get the details of these new rules many places on-line. (See Dr. Sherry Cooper's article “MORNEAU TAKES OUT THE BIG GUNS TO SLOW HOUSING”. I want to discuss why I think these rules are going to be implements and how they will impact Canadians.

Apparently this is an official policy initiated by the federal government with an aim to further tighten bank lending rules to prevent some future financial calamity as we witnessed primarily in 2008. Furthermore, these initiatives will have the net affect of slowing down the real estate market especially in the larger metropolises like Vancouver and Toronto for ward off further inflation of the real estate bubble in those cities. Official news sources would have us believe that these federal government initiative are imposed on banks and some federal ministry is solely responsible for these changes. I find this difficult to believe.

I can't imagine that banks had no input into these mortgage rules changes and had no prior knowledge of their inevitability. So whats the point of these changes? The point is that banks will be perceived to be innocent bystanders and having no choice but to accept and implement these new rules. Furthermore, the tougher qualification and lending requirements along with the associated higher costs, which banks will have to pass on to us – the consumer, is none of their doing.

These new rules will end up costing many mortgage holders more in terms of CMHC insurance cost – period! Some mortgage holders may not even re-qualify when tested against the new rules for the mortgage that they had previously qualified for under the old rules. The fall-out will, unfortunately, impact people's lives and cause them all sorts of personal hardships.

The question needs to be asked: What is it that banks want to protect themselves from? One can make the argument that it has dawned on banks that they have over exposed themselves particularly in the Vancouver and Toronto markets and that should financial turmoil befall us the corresponding correction in the real estate market will expose them to too much risk which they are not willing to assume themselves. This, even though borrowers met the banks mortgage rules when they initially qualified for their mortgage. So instead of assuming the risk that they created when they gave the borrower the mortgage to begin with, they want to pass any risk along to us and pretend that they are only following orders from the federal government. At least that's my take!

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