Harbourwalk Condos.Canadian house prices may fall by 18%. The state-run mortgage insurance company of the Canadian federal government, commercial banks and mortgage companies have stopped providing high-risk home purchase loans to first-time buyers because such high-risk loans endanger the Canadian economy.Please Visit: Harbourwalk Condos to Get Your VVIP Registration Today!
Evan Siddall’s warning letter is addressed to federal officials and heads of commercial banks and credit unions. Evan Siddall, chief executive of the Canadian mortgage and housing company, posted the warning on social media after the warning was reported by the financial news agency BNNBloomberg.
In this letter, Evan Siddall requests Canadian commercial banks and credit unions to continue to support Canadian mortgage and housing companies in their efforts to protect the health and safety of the Canadian mortgage industry.
Although the Canadian Home loan and Housing Corporation does not provide home purchase loans directly to Canadian home buyers, it provides home purchase loan insurance, so it has a great influence on the Canadian real estate market.
By the end of 2019, the Canadian Mortgage and Housing Corporation had insured mortgage insurance against C $429 billion of real estate assets.
According to Canadian financial regulations, buyers with a down payment of less than 20% of the house price must take out mortgage insurance to be held responsible by the mortgage insurance company if the buyer is unable to make payments on the mortgage. This is a protective measure to prevent the Canadian real estate market from being adversely affected by mortgage default.
However, the rule that buyers with a down payment of less than 20% of the house price have to buy mortgage insurance has also significantly increased their purchase costs.
At the beginning of the summer of 2020, the Canadian Mortgage and Housing Corporation announced that it would tighten the issuance standards of mortgage insurance. measures have been taken to increase the credit rating scores required for the issuance of mortgage insurance, set a ceiling on the ratio of debt to income, and prohibit borrowing money to make down payments for home purchases, in order to make it more difficult for home buyers to obtain home loan insurance and reduce the debt risk borne by home buyers.
However, the measures taken by Canadian mortgage and housing companies to tighten mortgage insurance standards have not had the desired effect. The reason is that although CMHC plays a leading role in the field of mortgage insurance in Canada, some other private companies provide mortgage insurance after all; this time, these private mortgage insurers have not taken the same measures to tighten mortgage insurance standards as in the past.
In other words, these private mortgage insurers have included customers restricted by CMHC’s strict mortgage insurance standards by continuing to maintain relatively loose mortgage insurance standards.
Evan Siddall, CEO of the Canadian federal mortgage and housing company, warned that excessive debt not only increases the risk of home loans, but also drags down Canada’s economic development. Canadians’ debt has already exceeded 100% of household income, reaching a high of almost 115%.
The Swiss-based bank for international settlements warns that household debt exceeding pre-tax income by 80% is bad news for the economy.
Although the COVID-19 pneumonia epidemic has almost brought the Canadian economy to a standstill, the average house price in the Canadian real estate market has not fallen.
Evan Siddall’s explanation is that the Canadian government’s huge bailout measures are the main reason why Canadian house prices have not fallen. But the government’s bailout measures will end in the next few months, and commercial banks will soon allow homeowners to postpone mortgage payments, which will lead to overburdened homeowners eager to sell their homes. and potential buyers are reluctant to buy in the market, resulting in a fall in house prices.
The Canadian Mortgage and Housing Corporation predicts that Canadian house prices could fall by as much as 18% over the next two years.