Current Mortgage Annoucements and What it all Means

I'm sure many of you reading this are wondering what Tuesday's announcement about mortgages will mean to you, the consumer.  Well, Canada's Minister of Finance, Jim Flaherty announced on Tuesday that as of April 19th, 2010:

- down payments on investment or income properties (not occupied by the owner) will jump from 5% to 20%.

- current mortgage holders looking to refinance, will only be able to withdraw 90% of the value of their home, dropping only 5% from the current 95%.

-all borrowers will have to meet the standards for a 5-year fixed rate mortgage.  Should they choose a shorter term, they still must qualify for the 5-year fixed rate. 

What does it mean?

For income property investors, especially ones just starting out, jumping from a minimum of 5% down to 20% necessary for a down payment, could quite possibly annihilate the opportunity of such investing.  What does that mean to renters? Well, it is my opinion that you can more than likely expect to see rents rise over the next 2-5 years, less people will be able to enter into the housing market and offer rentals to renters, thus, a monopoly will begin.

For seasoned home owners, the decrease in refinancing amounts from 95% to 90% probably won't make too much of a difference, however, to put it into perspective, on a $500,000 home, that's $25,000 of dissimilarity.

Borrowers looking to purchase a home, will need to meet the income standards required on a 5-year fixed term mortgage.  Some may wish to go with a 3-year fixed term, (lesser interest) however, they will still need to qualify for the 5-year fixed term.  The reason for this, is to help prepare borrowers for interest rates that the future holds. 

That sums up what's going on in the mortgage world at the moment!

What do I think?

If you're looking to buy an investment property and can't afford the 20% down payment (as most people don't have $30,000-$50,000 at their disposal), you better start looking!  April 19th is fast approaching.
As for the other two announcements, I think that long-term they will help stabilize the Canadian housing market, thus, avoiding a "correction" aka demise such as that of the United States in the past year or more.  Short-term however, I predict the market changing to that of a buyer's market in the next 2 months, as buyers will want to make it in "under the wire", and sellers eager to sell, with worries that if they don't, it could be months longer before someone else makes an offer.

That's all for now, and feel free to leave comments about your own predictions of what the future holds for the housing markets!

As always, thank you for reading.