Finance Minister Jim Flaherty outlined new rules aimed at reining in a hot housing market today and ensuring Canadians aren't taking on more debt than they can afford.

Flaherty outlined a series of changes to the rules that govern the Canada Mortgage and Housing Corporation, the crown corporation that effectively oversees the housing market by insuring the vast majority of Canadian mortgages.

The most important new change is that the maximum amortization period to 25 years, down from 30. The longer a mortgage is spread out, the lower the monthly mortgage payments are — but the more the borrower ends up paying overall over time.

The impact of the change is likely to be significant. It's about the same as a 0.9 percentage point increase on a typical mortgage, Bank of Montreal economist Robert Kavcic noted.

It's also likely to affect a huge segment of the market, as about 40 per cent of all new mortgages were amortized over 30 years last year, the Canadian Association of Accredited Mortgage Professionals estimates.

Anyone who needed or wanted a 30-year mortgage before is going to have to qualify under tougher 25-year requirements now.

Ottawa has now moved three times to rein in the maximum mortgage term, since the CMHC briefly started insuring mortgages with 40-year terms in 2006. The limit was brought down to 35 years, then 30 and now the more traditional 25.

"The reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage," Flaherty said.

"Our government has encouraged Canadians to borrow responsibly," Flaherty said. "Most Canadians have done so."

At 25 years, the maximum amortization period for CMHC-backed loans is now back to where it had historically been before the Harper government began raising the period after taking office in 2006.

What is an 'insured' mortgage?

In order to guard against risk in the financial system, Canadian law requires certain borrowers to purchase insurance against their loan, in case they end up defaulting on it.

Under the current rules, any would-be home buyer must purchase insurance (this most often comes from CMHC, but sometimes from other private-sector insurers) if their down payment is less than 20 per cent of the value of the home.

Any borrower who meets that threshold can get a mortgage from a bank without having to obtain insurance, and those are known as "uninsured" mortgages. So a borrower who gets a $300,000 mortgage and puts down only $30,000 or 10 per cent on the home would be insured, but a borrower who has $100,000 down for the same home would be uninsured.

For the full story provided by CBC News, click http://www.cbc.ca/news/business/story/2012/06/21/flaherty-mortgage-cmhc.html 

All the hype, is just that. Hype.

It is tough today to get a firm grasp on what is taking part in our real estate market. If you have read any articles or watched the news lately, it is filled with a ton of gloom and doom, stating ‘our’ market is down 10% from this time last year. What a terrible time to own a home! 

Let’s pull back on that thought a bit to exam some facts. When you hear about ‘our’ market, most of the time that means the Vancouver market, not the Fraser Valley. We are the little brother to the Vancouver market and tend to follow their trends, yet there are some reasons why we may not.

1. We are affordable in the Fraser Valley, much more so than North of the river (Vancouver, Burnaby, ect.)
2. At this time last year, a large Asian influx was purchasing up a ton of high end homes in Vancouver, Richmond and White Rock, squewing our numbers dramatically.

The facts are in our numbers. In our area, we have 3 types of markets:

• A Buyer’s market – over 7 months of inventory (where buyers are favoured with tons of inventory and choice)
• A Seller’s market – under 5 months of inventory (Where sellers are favoured with minimal inventory promoting competition among buyers)
• A balanced market –between 5-7 months of inventory (where both buyers and sellers have equal opportunity and prices remain stagnant)

With the latest statistics, we can see there are huge differences in the areas based on what we hear on the news. Look below to find your area and product type to get an accurate idea of what is happening right now.

Condos =             C             Townhomes =      T           Detached Homes =         D

So what does all this mean? Not a whole lot unless you are planning to get out of the market today. When you are buying or selling, you are getting into the market and likely going to stay in there. Whether you buy high or buy low, sell high or sell low, everyone is riding the same wave of activity you are. At the end of the day, no one has a crystal ball to dictate what may happen tomorrow yet all things tend to come back around regardless of if we are on a high or a low. If you don’t believe me, type “hipster” into Wikipedia and you won’t believe people think that style is back. Believe me, it’s back.

Until next time,

Darin