Canada to tighten mortgage rules: source

Canada to tighten mortgage rules: source

OTTAWA (Reuters) - Canada is set to tighten mortgage rules on Thursday as it seeks to cool a heated housing market, by cutting the maximum term of mortgages and reducing the amount a home buyer can borrow, a government official said on Wednesday.

The announcement, expected at a news conference with Finance Minister Jim Flaherty, will be the fourth time the government intervened to curb the mortgage market since 2008. The Finance Department says Flaherty is scheduled to hold a news conference on Thursday at 8:15 a.m. (1215 GMT).

A government official, who spoke on condition of anonymity, said the government will reduce the maximum amortization period of a mortgage to 25 years from 30 years, and lower the level of home equity that can be borrowed against to 80 percent from 85 percent.

On its main evening news program, the Canadian Broadcasting Corporation said changes at the government housing agency responsible for insuring higher-risk mortgages were also possible.

Rising housing prices and extremely low interest rates for mortgages have fueled a Canadian real estate boom that has led some analysts to predict a bubble that could raise the risk of a crash and a broader economic downturn.

Prices have softened in some markets recently, but a strong condominium market in Toronto, the country's largest city, has been of particular concern to policymakers.

The Bank of Canada said this month that high household debt was the biggest domestic risk to the economy. The debt-to-income ratio is at a record high of 152 percent.

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Variable Rates:

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Variable Rates (starting from):  Prime Rate - 0.10% = 2.90%

SECURED LINES OF CREDIT STARTING FROM PRIME + 0.50% = 3.50%

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Term:	Our Best Rates:	POSTED RATES:
1 yr	2.89%	3.20%
2 yr	2.69%	3.55%
3 yr	2.99%	3.95%
4 yr	3.25%	4.64%
5 yr	3.09%	5.24%
7 yr	3.99%	6.35%
10 yr	3.99%	6.75%

           

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Mortgage Cents Inc. is a financial business entity assisting people with residential and commercial mortgages, and property finance. They not only provide mortgage loans and refinancing services, but also present great opportunities in mortgage investments. Their team of financial experts and mortgage brokers at Mortgage Cents ensures that you get the best deal.

Mortgage Cents can help you in following ways:

1. With Financing – If you are looking to buy a residential or commercial property and need financial help in form of mortgage loans, Mortgage Cents can help you. Mortgage Cents has partnered with a network of private mortgage investors, several banks, and financial institutions for offering mortgage services to customers in Canada. The strong association of Mortgage Cents with wide range of financial institutions ensures that you get the best deal.

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3. Consulting – In addition to mortgage financing and real wealth investments, Mortgage Cents also offers consulting services to help you make informed decisions before selecting a mortgage option or an investment opportunity.

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Variable Rates:

Prime:  3.00%

Variable Rates (starting from):  Prime Rate - 0.10% = 2.90%

SECURED LINES OF CREDIT STARTING FROM PRIME + 0.50% = 3.50%

Fixed, Closed Rates:

Term:	Our Best Rates:	POSTED RATES:
1 yr	2.89%	3.20%
2 yr	3.05%	3.55%
3 yr	2.99%*	3.95%*
4 yr	3.25%*	4.64%*
5 yr	3.15%/3.29*	5.24%*
7 yr	3.99%	6.35%
10 yr	3.99%	6.75%

           

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Subprime Crisis Explained

How Heidi and her bar caused the 2008 global economic crash

Anyone doing research into the 2008 subprime mortgage securities scandal inevitably comes across the Internet gem below.

Often titled “Derivative markets — an understandable explanation” but more commonly known by its first sentence — “Heidi is the proprietor of a bar in Detroit,” it appears to have been written in 2009 by an author with considerable understanding of financial markets and a great sense of humor.

And it provides a good, basic explanation of the origins of the subprime mortgage securities crisis that led to a global credit freeze and the ongoing world-wide economic tsunami from which we may never fully recover.

Without further ado, here it is:

•••

Heidi is the proprietor of a bar in Detroit .

She realizes virtually all of her customers are unemployed and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi’s gross sales volume increases massively.

A young and dynamic vice-president at Heidi’s local bank recognizes these customer debts constitute valuable future assets and increases Heidi’s borrowing limit.

He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!

At the bank’s corporate headquarters, expert traders figure out a way to make huge commissions, and transform these customer loans into DRINK BONDS.

These “securities” are bundled and traded on international securities markets.

Naive investors don’t really understand the securities being sold to them as “AAA Secured Bonds” really are debts of unemployed alcoholics.

Nevertheless, the bond prices continuously climb and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by Heidi’s bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations to the bank she is forced into bankruptcy. The bar closes and Heidi’s 11 employees lose their jobs.

Overnight, DRINK BOND prices drop by 90%.

The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the bond securities.

They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

In addition, the laid-off workers’ pension funds and Individual Retirement Accounts all suffer substantial loss in value.

Fortunately, though, the bank, brokerage houses and their respective executives are saved and bailed out by a multibillion dollar, no-strings attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class nondrinkers who have never been in or heard of Heidi’s bar.

Now do you understand?

Best Rate Listing

(Rates current as of April 3^rd 2012)

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Variable Rates:

Prime:  3.00%

Variable Rates (starting from):  Prime Rate = 2.85%

SECURED LINES OF CREDIT STARTING FROM PRIME + 0.50% = 3.50%

Fixed, Closed Rates:

Term:	Our Best Rates:
1 yr	2.89%
2 yr	3.05%
3 yr	2.99%*
4 yr	3.25%
5 yr	3.20%*
7 yr	3.99%
10 yr	3.99%

           

* Certain Restrictions Apply *

** Data collected from 50 + Lenders **

*** Rates subject to change without notice. ***

Current promotions with lenders are not reflected in the above rates. For more information on specific lender promotions, please contact us for further details.

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