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To comprehend the innovation and change that the mortgage trade in Canada underwent, we first must make sense of the changes that took place in the housing market. The housing trade is one of the many components along with the Canadian economy and monetary policies that affected the transformation. Looking at affordability measures that compare payments on houses to income show us the extreme change the housing trade suffered over the last year or so. Comparing house prices, rent prices and the price-to-income charts we have noticed very similar outcomes. Since late 2008 and the beginning of 2009 house prices have slumped, though they are now showing signs of recovery. The reason resale prices have been pushed sharply upwards recently is the combination of sales recovery with tight supply conditions. We have created an article called Canada and International Housing Markets, for you go through, if you would like more information on the changes within the real estate prices around the world.

Refinements to the mortgage trade

Quite a few countries chose to make little change to the mortgage buy to let mortgages market, this was not the situation in Canada. Early 2006 the federal government made mortgage insurance more liberal and that’s when the changes occurred in the mortgage market. For the innovations to take place the market demanded a strong and pro-active banking system with bank capitalization amongst other things. So far, all the changes took place in a traditional conservative sense but without a doubt, we can already see the market progressing. The down side to these changes is the risk of default in the future, but the upside is that purchasing a house now is more affordable to a wider range of customers. Although there was no way to stop the real estate market slowdown last year, these changes meant that the slowdown was delayed.

Mortgage amortization periods

When discussing about mortgage amortization years, three years ago, there was only one option to chose from, that being 25 years. Extensions to mortgage terms to 30, 35 and 40 year mortgages occurred after the alterations in 2006. About 10% and fewer of mortgages are taken out over the 35 to 40 year period say specialists from the Scotiabank group, whilst a further 18% are for greater than 25 years. As a repercussion of this adjustment, in the past year, 47% of new mortgages had amortizations longer than 25 years and 60% of these percentages were in the 35 and 40 year mortgages. Insurance companies are no longer supplying insurance for the 40 year term mortgages. Along with CMHC and Genworth, AIG declared in July 2008 this product was no longer available along with 100% funding for mortgages. But, uninsured 40 year mortgages are still available.

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