Posted by: Daryl & Wendy Ashby | December 6, 2012

Government Imposed Limits

The $600B Ceiling

Last week CMHC announced it insured a whopping 54,435 fewer housing units (down 37% in just a 3 month period). Canada’s largest mortgage insurer now has $575.8 Billion of insured mortgages outstanding. Just 4% under it’s $600 Billion government imposed limit.”

This lack and tightening of liquidity means fewer options and higher costs for lenders and clients, both high-ratio (insured) and conventional. Why? Most wholesale lenders rely on bulk insurance for their product lines to keep rates low. These wholesale lenders also force the big banks to reduce their rates to stay competitive.

With refinancing and Equity Take-Outs becoming increasingly difficult, trapped equity is becoming more common. As maximum Loan-to-Values and other lending guidelines constrict along with home values in many areas, accessing one’s perceived equity is only getting harder and inevitably more expensive.

For many, home equity represents their most significant investment, often forming all or part of a retirement plan and/or contingency reserve. If one’s access to that equity becomes limited to selling, it doesn’t help if prices decrease, sales slow or they don’t wish to move but still require their equity (for emergency, living expenses, business use, investment, etc.).

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