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A rule change from the federal government’s mortgage insurer has revealed the price chasm that exists in B.C.’s Lower Mainland housing market.
Metro Vancouver realtors in high-end neighbourhoods say the latest tightening of the mortgage insurance market should have a minimal impact on their housing market, despite the fact that Canada Mortgage and Housing Corp. (CMHC) insurance will no longer be allowed on second properties.
The ruling, however could impact middle-class homeowners trying to help their kids with a home purchase, a Fraser Valley realtor warns.
Mortgage insurance is required if a buyer is purchasing with less than 20 per cent equity. CMHC is the largest mortgage insurer in Canada.
Recent studies have shown that many parents are helping their children buy their first home, but Neil Hamilton, a West Side Vancouver realtor with MacDonald Realty Ltd. said most of these buyers don’t need mortgage insurance.
“It is a non-issue here,” Hamilton said, noting that 50 per cent to 70 per cent downpayments are not uncommon. The benchmark price for a detached house on the West Side of Vancouver hit $2.2 million in April, reports the Real Estate Board of Greater Vancouver.
Bill Binnie, broker/owner of Royal LePage Northshore in West Vancouver, where the average detached house price is now $1.9 million, agreed. “Most of the parents helping their kids have plenty of equity or even a clear mortgage.”
Also, Binnie noted that people buying secondary homes have been restricted to purchasing with at least a 20 per cent downpayment for the past year.
Hamilton added that there are also private insurers that homebuyers can turn to if they can’t meet the CMHC requirements.
The new CMHC rules, which are a continuation of a tightening on mortgage insurance over the past two years, come into effect on May 30, 2014.
“We don’t have wheelbarrows full of money out here,” said Surrey-based Brent Roberts, owner/broker of Royal Lepage Brent Roberts Realty. “This change will absolutely affect the ability of parents trying to help their children buy a home.”
Roberts said many homeowners in the Fraser Valley, where the average house price is now $566,000, already have a high-ratio mortgage with CMHC insurance. “If their kid is going to UBC or SFU, the price of condo can be worth more than the family house in the Fraser Valley,” he explained. Most could not afford a 20 per cent downpayment on such a purchase, he added.
The Western Investor