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March 13, 2018

Mortgages Without Stress-Tests

So how are the new lending “Stress Tests” treating you? If you are here reading this blog, probably not all that well?

It would appear you are not alone. Based on the latest statistics, it sounds like this last round of lending tightening is having a huge impact:

https://www.thestar.com/business/real_estate/2018/02/22/toronto-new-home-sales-down-48-from-january-2017.html

Wow. A 48% reduction in new house purchases! A 10-year low in sales! Isn’t that great? So the stated goal was to make housing more affordable, but what we now seem to have is lending rules are so (artificially) tight that no one can buy, because they can’t get financing. Maybe if we tighten some more, there will no sales at all – and then various government officials can proudly make speeches, “House prices haven’t gone up  … for years!”

As I have typed in this blog before, you should probably listen to anything Benjamin Tal says about Toronto housing. He is a CIBC economist, but more importantly – he is obviously a smart fellow. I have learned a great deal from Mr Benjamin, and I learn more every week.

A few weeks ago, there was an article in the Financial Post, where Mr Benjamin is quoted – saying more succintly than I ever could, ““We’re using demand tools to fight supply issues,” Tal said. “It (supply) is lagging way behind.”

http://business.financialpost.com/personal-finance/mortgages-real-estate/prices-have-nowhere-to-go-but-up-as-housing- supply-lags-demand-in-toronto-and-vancouver

Yes indeed.  Rather than help builders build, we make it harder and harder for buyers to buy. If we made it easier for builders to build, we could quickly crank up the number of houses that are available on the market, and then … prices could stabilize. Maybe we should try some of that … for a change?

In the meantime, you can still buy a house with no stress tests at all – using private money. I am currently advertising private mortgages from as low as 5.99%. You will need a downpayment – but all these stress tests are out the window with private funds.

Some people tell me that 5.99% is “very expensive”. Is it? I bought my first place with a Bank of Montreal 5-year mortgage, with a 7.25% annual rate. And that was considered “really low”. I bought my current house with a 5.47% VARIABLE mortgage -and that was considered really cheap at the time. So I am not sure that 5.99% is all that expensive at all. I have TSX60 stocks that are currently paying me a 6.5% just in dividends right now …

So – until some folks in government figure out that we need to BUILD to fix the under-supply problem, you can get on with your life if you don’t want to keep waiting.  Give me a call, and we can discuss a private mortgage.

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