It doesn’t matter which side of the debate you fall on, it seems every broker across Canada has an opinion about this controversial topic
Debate heats up following one industry professional’s suggestions that tougher qualification rules are required.
Brokers took to the comments section of MortgageBrokerNews.ca to voice their opinions following a suggestion that qualification standards for five-year fixed rate mortgages should be more difficult.
“While I agree with Ross there is a fundamental risk in our distorted real estate marketplace; I don't see that it makes sense to lay it at the feet of qualifying a 5-year fixed rate mortgage at the contract rate,” Ron Butler of Verico Butler Mortgage wrote. “Interest rates have bounced around quite a bit in the last 30 years and Canadian homeowners have always found a way to manage all of those fluctuations.”
Clients taking a five-year mortgage rate can qualify at the contract rate. However, variable rate mortgages and fixed mortgages under five years typically require homebuyers to qualify at a higher “benchmark” rate.
The comments poured in after Calum Ross, a Toronto-based broker, made a sombre prediction about five-year qualifying rates last year.
“100% there should be tougher standards for qualifying for a five-year fixed rate; I’m in awe that they haven’t done it,” Calum Ross, principal broker of Verico Calum Ross Mortgage, told MortgageBrokerNews.ca last week. “With the Big Short movie out and everyone saying Canada is immune (to a similar downturn); I’m going to say the five-year qualifying rate is a disaster waiting to happen."
While it was an unpopular opinion among many, several brokers agreed with Ross’ premise.
“The fact is that a person opting for a variable mortgage or for a term less than five years is expected to be able to afford a rate increase up to the benchmark of say 4.64%, for their own protection just in case,” Ad Lakhanpal, a broker with Mortgage Alliance, wrote in the comments section of MBN. “The same idea should apply to a person opting for a five-year term. This way, everyone including borrowers, banks and insurers are protected equally.”
Brokers took to the comments section of MortgageBrokerNews.ca to voice their opinions following a suggestion that qualification standards for five-year fixed rate mortgages should be more difficult.
“While I agree with Ross there is a fundamental risk in our distorted real estate marketplace; I don't see that it makes sense to lay it at the feet of qualifying a 5-year fixed rate mortgage at the contract rate,” Ron Butler of Verico Butler Mortgage wrote. “Interest rates have bounced around quite a bit in the last 30 years and Canadian homeowners have always found a way to manage all of those fluctuations.”
Clients taking a five-year mortgage rate can qualify at the contract rate. However, variable rate mortgages and fixed mortgages under five years typically require homebuyers to qualify at a higher “benchmark” rate.
The comments poured in after Calum Ross, a Toronto-based broker, made a sombre prediction about five-year qualifying rates last year.
“100% there should be tougher standards for qualifying for a five-year fixed rate; I’m in awe that they haven’t done it,” Calum Ross, principal broker of Verico Calum Ross Mortgage, told MortgageBrokerNews.ca last week. “With the Big Short movie out and everyone saying Canada is immune (to a similar downturn); I’m going to say the five-year qualifying rate is a disaster waiting to happen."
While it was an unpopular opinion among many, several brokers agreed with Ross’ premise.
“The fact is that a person opting for a variable mortgage or for a term less than five years is expected to be able to afford a rate increase up to the benchmark of say 4.64%, for their own protection just in case,” Ad Lakhanpal, a broker with Mortgage Alliance, wrote in the comments section of MBN. “The same idea should apply to a person opting for a five-year term. This way, everyone including borrowers, banks and insurers are protected equally.”
