The Federal govt controls hi-ratio mortgage lending…. (mortgages that are greater than 80% loan to value)…  There is a $600 billion limit for Canada Mortgage and Housing Corporation (CMHC… a federal corp).   And a $250 billion limit for Genworth Financial Canada (a private corp).

Last year, the govt reported CMHC was fast approaching it’s $600 billion limit and that it had no intentions of increasing that limit.  Then last month, the federal govt announced they would increase Genworth’s limit to $300 billon.  This gives Canada’s mortgage lenders some breathing room as it now appears as though there is enough room to cover mortgages for a few years…

WHY YOU SHOULD PAY ATTENTION

This latest move troubles me…  Finance Minister Flaherty has repeatedly said he would like to see CMHC privatized over the next 5 to 10 years.  While I’m all for less govt and more privatization, housing programs have been a huge win both the citizens of Canada and the govt.    CMHC is profitable… they earn billions of dollars each year.   They also make the dream of owning a home a reality for thousands of Canadians each and every year.   Our economy depends on a healthy housing market.

Privatization would mean less competition for mortgage insurers….Less competition ALWAYS means higher cost to the consumer…  We’ve seen and experienced this with the BIG SIX BANKs and their user fees, obscene mortgage penalties and RECORD BANK profits in 2012 (don’t worry, Canadians have begun to catch on to the BIG SIX and are slowly pulling away according to the latest stats)..  We should expect the same if the Feds are allowed to push through the sale or closure of CMHC…

Let’s hope the govt will not do anything as crazy as to privatize a 66-year-old govt corp that has played such an important role in shaping Canada’s landscape….  I can only imagine what would have happened if CMHC was not around in October 2008, when the US sub-prime mortgage crisis hit….  There has been much talk about our strong Banking and Financial sector that saved us from a similar economic collapse…  But would the private insurers still have offered the much-needed mortgage insurance products during those critical first 6 months after the crisis?  Would that infamous stable, Canadian housing market, been able to survive the US shock waves?    Would our economy still be the envy of the world?  Or would we be just as vulnerable and suffer the same fate as so many other countries did….and like so many other countries still do… and struggle to recover.

When the forerunner of the Canada Mortgage and Housing Corporation opened shop in 1946, its job was to help war veterans find housing. From those humble beginnings, CMHC has emerged as a financial market giant. As this baby-boom behemoth contemplates life after 65, it, like many of us, should consider a more modest public role.

By the 1950s, CMHC was in the affordable (public) housing business; Toronto’s Regent Park was one of its first projects. The agency’s social policy portfolio expanded, with assisted housing and assisted home-ownership programs, on-reserve housing, and green energy and conservation programs.

What has also grown is CMHC’s mortgage loan insurance program. Federal law requires successful mortgage applicants to buy mortgage insurance if their down payments are less than a legal minimum (currently 20 per cent of the home purchase value).

This insurance guarantees lenders are repaid in full, even if borrowers default on their mortgages; this, for good or ill, lifts from financial institutions most of the risks associated with mortgage lending. Those risks are big: Through mortgage insurance, CMHC’s gross loan exposure is now scraping its $600-billion legislated limit. Taxpayers are shielded in part by CMHC’s $13-billion equity buffer, but nonetheless are exposed to the liabilities that will follow on an extended housing market downturn.

Now, while high loan-to-value-ratio borrowers must buy mortgage insurance, they need not buy it from CMHC. Smaller, private sector providers supply about 30 per cent of the market. They offer products and prices similar to CMHC’s, and are similarly on the hook when mortgages go bust. There is no direct taxpayer exposure to those bad loans. However, if the insurer itself were to go bust, taxpayers are responsible for 90 per cent of the residual exposure.

The reason for the private sector’s federal backstop is to lower financial institutions’ capital costs. If an insurance provider with a federal backstop insures banks’ mortgage lending, under international agreements and domestic regulation, lenders need to reserve little or no capital against their mortgage books. Insured mortgage lending is almost riskless and costless to lenders.

Many questions flow from this situation. Why does the Crown corporation do all of the things it does? Why aren’t social housing and related social programs part of a division of Human Resources and Skills Development Canada, where similar social programs reside? Why aren’t housing market data functions handled and financed by Statistics Canada? Why aren’t green energy programs part of Natural Resources Canada? Why aren’t mortgage bond and securitization programs run by Treasury or Finance?

And that leaves mortgage insurance. This usually is a profitable business – people must buy the product, and to do so at the price CMHC sets. But why does the federal government hustle mortgage insurance, and not auto insurance?

Given such questions, the obvious next step would be to split up CMHC.

Few outside government would notice if Statscan took over housing market data, or if energy-conservation programs migrated to other federal departments. CMHC’s financial market functions are already overseen by Finance and the Office of the Superintendent of Financial Institutions, which also inspects private insurers. And the Canada Mortgage Bond program could be run by Treasury.

The mortgage insurance program, meanwhile, would be an attractive investment for a well-capitalized domestic financial institution, such as a pension fund (the Ontario Teachers’ Pension Plan already owns half of one of the private insurers). In private hands, the current insurance book could be grandfathered, and new contracts underwritten by a reconfigured agency called, say, the CMHC.

Again, few would notice the shift; the key difference would be the new layer of taxpayer protection afforded by a 90-per-cent (or lower) guarantee of residual housing market liabilities, rather than the 100-per-cent exposure within the current CMHC. In a market occupied by private competitors, a broader range of portable insurance products and prices seems a likely outcome.

Mortgages and mortgage insurance would still be regulated by federal and provincial rules, exactly as now. Regulation of conduct and oversight with respect to financial stability would still be federal responsibilities. Consumers and most market participants would be unaffected by the change.

CMHC, as it exists, has outlived its mandate.

 http://www.theglobeandmail.com/report-on-business/economy/housing/private-sector-should-take-on-cmhcs-role/article6922279/?service=print

The 12-month change in the Teranet-National Bank House Price Index has decelerated in recent months to 3.4%, led by declines in Vancouver (-1.4%) and Victoria (-1.7%). Some people interpret this weakness as a sign that a housing crash has started – see, for example, the Canadian Business article “Canada’s housing crash begins.” I don’t see a collapse in 2013 for several reasons. One is the highly supportive monetary environment.

In the case of the US housing boom from 2003 to 2007, the overvaluation was pricked after the Federal Reserve dramatically tightened monetary policy to cool off an overheated economy. This catalyst is absent in Canada as 2013 commences.

Indeed, monetary policies in Canada, the US, Japan, China and elsewhere around the world are dialled to the opposite extreme. They are hyper-expansionary, with interest rates at record lows and printing presses running like never before.

This means that Canada and other countries should continue generating growth in jobs and income. Since higher employment and income typically support housing markets, prices are not likely to fall much in 2013. Or if they do, they shouldn’t stay down for long.

Click here for the full Globe and Mail article.

US Congress’ excruciating, extraordinary New Year’s Day approval of a compromise averting a prolonged tumble off the fiscal cliff hands President Barack Obama most of the tax boosts on the rich that he campaigned on. It also prevents House Republicans from facing blame for blocking tax cuts for most American households, though most GOP lawmakers parted ways with Speaker John Boehner and opposed the measure.

Passage also lays the groundwork for future battles between the two sides over federal spending and debt.

Capping a holiday season political spectacle that featured enough high and low notes for a Broadway musical, the GOP-run House voted final approval for the measure by 257-167 late Tuesday. That came after the Democratic-led Senate used a wee-hours 89-8 roll call to assent to the bill, belying the partisan brinkmanship that coloured much of the path to the final deal.

“A central promise of my campaign for president was to change the tax code that was too skewed towards the wealthy at the expense of working middle-class Americans,” Obama said at the White House before flying to Hawaii to resume his holiday break. “Tonight we’ve done that.”

Click here for more from the Globe and Mail.

Canada welcomed Washington’s last-minute deal on the fiscal cliff today, but warned that significant risks remained and urged more action to put the US fiscal situation on a sustainable path.

“Canada welcomes the agreement reached between the (US President Barack Obama) and the Congress that protects the US economy in the short term,” Finance Minister Jim Flaherty said in a statement.

“That said, there remain a number of significant risks to the US economic outlook. It is my hope that leaders in the United States continue to work together to develop future action that will put the US fiscal position on a sustainable path,” he said.

Click here for full details in the Financial Post.

You’ve probably missed the bottom of the US housing market, but the question for Canadians is whether it’s too late to jump in now.

Maybe it’s the strength of the loonie, the increasing value of their principal residences or the lure of still deeply discounted housing, but Canadians love the United States – especially the Sun Belt – where we remain the #1 foreign buyer of property.

Prices won’t likely go lower, says Beata Caranci, Deputy Chief Economist at TD Canada Trust. But, based on the 5% year-over-year growth that the United States has seen in average property values, they’re not returning to 2006 levels anytime soon either.

“If you were trying to get in at the very bottom, you missed it,” Caranci says. “You are still pretty darn close to skimming the bottom, and the more you wait, you can expect about 5% price growth every year.”

Click here to read the Financial Post article.

Canadians appear less concerned about retirement planning than in years past as they continue to focus on debt reduction as their main financial priority, according to a new study released today by CIBC.

Overall, the poll done for the bank by Harris/Decima showed 17% of respondents selected debt reduction as their main priority in 2013, unchanged from 2012 and the third year in a row that it has topped the list. Fourteen per cent chose debt reduction in 2011.

But while paying down debt topped the list, it remains to be seen how much progress Canadians will make in accomplishing that goal.

Despite having the same priority last year, Statistics Canada says the household debt to income ratio actually rose to a record high 164.6% in 2012.

Click here to read more in the Globe and Mail.

Click here for the CIBC press release.

The crash crowd says Canadian houses are overvalued on the basis of the price-to-income ratio. But with so much monetary stimulus in the system, the price-to-income ratio should also be normalized by income increases. (Ross D. Franklin/AP /Ross D. Franklin/AP) Trading Shots Why the housing market won’t crash in 2013 LARRY MACDONALD Special to The Globe and Mail Published Friday, Dec. 28 2012, 4:00 AM EST Last updated Friday, Dec. 28 2012, 4:00 AM EST

The 12-month change in the Teranet-National Bank House Price Index has decelerated in recent months to 3.4 per cent, led by declines in Vancouver (-1.4 per cent) and Victoria (-1.7 per cent). Some people interpret this weakness as a sign that a housing crash has started – see, for example, the Canadian Business article “Canada’s housing crash begins<http://d1ej5r2t2cu524.cloudfront.net/RaymondLee-Merix/merix-products-and-financial-update-please-respond-to-april-morin-merixfinancial-com/294705-d1ej5r2t2cu524.cloudfront.net/rachellegregorymarshall/merix-products-and-financial-update-please-reply-to-colleen-liao-merixfinancial-com/294625-www.canadianbusiness.com/lifestyle/canadas-housing-crash-begins/?c=2da348b7-ba03-400e-a47b-acd465ca2aa3>.” I don’t see a collapse in 2013 for several reasons. One is the highly supportive monetary environment.

In the case of the U.S. housing boom from 2003 to 2007, the overvaluation was pricked after the Federal Reserve dramatically tightened monetary policy to cool off an overheated economy. This catalyst is absent in Canada as 2013 commences.

Indeed, monetary policies in Canada, the U.S., Japan, China and elsewhere around the world are dialled to the opposite extreme. They are hyper-expansionary, with interest rates at record lows and printing presses running like never before.

This means that Canada and other countries should continue generating growth in jobs and income. Since higher employment and income typically support housing markets, prices are not likely to fall much in 2013. Or if they do, they shouldn’t stay down for long.

The crash crowd says Canadian houses are overvalued on the basis of the price-to-income ratio. So they fear the process of mean reversion will take prices down by 25 per cent or more. But with so much monetary stimulus in the system, the price-to-income ratio should also be normalized by income increases.

Interest rates may begin edging up later in 2013. They shouldn’t threaten the housing market because income and employment will be climbing as well, creating offsetting demand for housing. Similarly, the one-off impact of a tightening in mortgage rules during 2012 should not be cause for a serious setback.

There are other reasons for expecting a crash to be a no-show in 2013. Suffice it to say that the monetary cycle suggests a soft-landing scenario. This is not to deny there are pockets of extreme overvaluation or oversupply, where the risk of substantial correction remains. Cases in point could be Vancouver housing and Toronto condos

While I’ve been busy sinking money into mortgage payments, daycare costs, RESPs, RRSPs, utilities, groceries, vehicle maintenance and the occasional vacation, I’ve somehow failed to notice that many Canadians seem to be doing all this – and stepping up their mortgage repayments, too.

According to the Canadian Association of Accredited Mortgage Professionals, over the past 20 years mortgage repayment periods have shrunk to two-thirds of the actual contracted period. Furthermore, during the past year – a time when household debt has soared to a record high – 32 per cent of borrowers have managed to dramatically accelerate their mortgage payment schedules.

Yes, you read that right. At a time when Canadians have loaded up on consumer, house and car debt, it appears that many people are finding ways to pay off their mortgages faster.

Of the almost 6 million mortgage-holders in Canada, about 1.9 million made additional payment efforts during the past year. I was not one of them, unless the biweekly payment option counts. Instead, I am among the 60 per cent of mortgage holders who made only their minimum mortgage payment.

The association’s annual survey, which was released last month, contains some interesting data about those aspiring to be mortgage-free sooner.

• $300 – the average monthly increase to regular mortgage payments in the past year
• $22,500 – the average lump sum payment among mortgage-holders in the past year
• $29,000 – the average lump sum payment among those now mortgage-free during the last year of their mortgage

Of course, paying off a mortgage faster is a good thing. But is all this bumping up regular payment amounts, making an annual balloon payment and increasing the frequency of payments, actually making a serious dent in people’s overall debt load?

Not necessarily, says Rona Birenbaum, a financial planner with Caring for Clients in Toronto. When she sees clients with very aggressive amortization schedules, a closer look at their cash flow reveals a starkly troubling overall financial picture.

“How are you affording this?” she asks them, “You must be creating debt somewhere else, and they are.”

Credit card balances and lines of credit are often rising on the other side of the ledger, she said. Keep in mind that credit card debt comes with higher – often very high – interest rates. All of that means that while people’s mortgage debt is falling, their consumer debt is rising.

“Overall, they are not getting ahead,” Ms. Birenbaum said.

Ultimately, the goal of mortgage freedom makes financial sense for everyone. But Ms. Birenbaum believes that the right approach to repaying mortgage debt depends on the individual or family. It requires discipline with cash flow, and a commitment not to spend a sudden injection of income, such as inheritances or bonuses, on items other than mortgage repayment.

“Interest rates may be low, but any interest is money out of your pocket and into the banks,” she said.

And with mortgage rates well below historical averages, borrowers can certainly save money by taking advantage of the low rates to shorten their amortization period.

The survey also noted that the average interest rate was 3.55 per cent, and that mortgage rate discounting remains “widespread” in Canada – with the average actual rate for a five-year fixed rate mortgage at 1.85 percentage points lower than the posted rates.

The report, which is based on an online survey of 2,018 Canadians, found that one-third said low interest rates have helped them beef up repayments, and that the majority planned to pay off their mortgage in less than 25 years.

For Ms. Birenbaum, the report shows that borrowers are getting savvy when it comes to the flexibility offered in their mortgages, but it also reflects some anxiety about what rising interest rates can mean if they don’t have the capacity to pay.

“Canadians are pretty freaked out by what happened in the U.S. and they don’t want to go down that path,” she said.

As a result of prudent mortgage lending practices, the number of mortgages in arrears in Canada was trending down in 2011 and the first half of 2012, according to the Canadian Housing Observer, released yesterday by CMHC.

“The Canadian Housing Observer is an indispensable source of information about housing’s role in the economy, and better information helps contribute to the stability and efficiency of Canada’s housing system,” said Karen Kinsley, President of CMHC. “This marks the 10-year anniversary of this publication, relied on by many in the private, non-profit and government sectors for its analysis and insight into the dynamics of Canadian housing,” added Kinsley.

Click here to read the latest Canadian Housing Observer.

Click here to see CMHC’s press release.

While I’ve been busy sinking money into mortgage payments, daycare costs, RESPs, RRSPs, utilities, groceries, vehicle maintenance and the occasional vacation, I’ve somehow failed to notice that many Canadians seem to be doing all this – and stepping up their mortgage repayments, too.

According to the Canadian Association of Accredited Mortgage Professionals, over the past 20 years mortgage repayment periods have shrunk to two-thirds of the actual contracted period. Furthermore, during the past year – a time when household debt has soared to a record high – 32% of borrowers have managed to dramatically accelerate their mortgage payment schedules.

Yes, you read that right. At a time when Canadians have loaded up on consumer, house and car debt, it appears that many people are finding ways to pay off their mortgages faster.

Of the almost 6 million mortgage-holders in Canada, about 1.9 million made additional payment efforts during the past year. I was not one of them, unless the biweekly payment option counts. Instead, I am among the 60% of mortgage holders who made only their minimum mortgage payment.

Click here for more from the Globe and Mail.

OTTAWA — Canadians are more in hock today than ever before, Statistics Canada said Thursday in releasing fresh data on household debt.

The new report shows household debt to annual disposable income reached a new high at 164.6%, from 163.3% the previous quarter.

Bank of Canada governor Mark Carney has named rising household debt a key risk to the Canadian economy, but noted this week he was encouraged that credit growth appeared to be slowing.

Still, Carney has also said he expects the debt-to-income ratio to keep rising over the next couple of years. That is in part because of a lag in time between purchase decisions — such as a new home — and when the debt gets registered.

In the July-September period, households borrowed $27.3-billion, $18.4-billion of that in mortgages, while consumer credit levels increased by $7-billion to $474-billion.

The high debt-to-income number may surprise Canadians who only a few months ago were told it was just above 150%. But Statistics Canada has recently revised how it calculates the measure to make it more representative of actual household finances.

As well, household net worth rose 1% to $197,800 in the July-September period, mostly due to gains in holdings in stocks, including mutual funds, and increased value of pension assets.

Economist Jimmy Jean of Desjardins Capital Markets said the report is unlikely to change the perception of Canada’s debt problem.

The debt-to-income ratio has been setting new records since 2003, but remains below the peak reached south of the border before the 2007 housing crash. StatsCan says using equivalent measurements, Canada’s ratio is about 10 percentage points below the peak reached in the U.S. prior to the housing crash in 2007.

The Bank of Canada, Jean notes, shouldn’t be shifted from its interest rate stance given “the evolution of debt seems to tie in to its expectations.” He pointed out that the effect of mortgage tightening rules brought in July had only begun to be felt in the third quarter numbers.

But while managing debt doesn’t appear to be a major concern at the moment, thanks to super-low interest rates, the danger signs continue to flash red, economists warned.

“The high level of debt leaves households more vulnerable to a rise in interest rates than they have been in the past,” said TD Bank economist Diana Petramala.

“Given the prospects that interest rates will eventually rise, households must cool their spending and borrowing further.”

On a national accounting level, Canada’s net worth increased by more than $9-billion in the third quarter to $6.8-trillion. That translates to $194,100 per person.

However, an increase in net foreign indebtedness dampened the gain, the agency said.

This higher net foreign debt was largely a result of increased Canadian borrowing abroad, as well as a decrease in the value of Canadian investments denominated in foreign currency because of the rising value of the loonie.

 The Canadian Press

On Thursday, Amanda Lang—co-host of The Lang and O’Leary Exchange—made a comment worth exploring.

While talking with Kevin O’Leary about the risks of variable mortgage rates, she stated:

“Some people can forecast [rates] and arrange their affairs accordingly. Rates won’t…gap up. They will climb in some orderly fashion.

…It’s very rare to see a multi-move up or down with interest rates…People of means…can actually take their time…and then still lock in with plenty of time to get a decent longer-term rate.”

If you’ve studied rate history, however, you know that interest rate behaviour doesn’t cater to these assumptions.

In the modern era of Canadian monetary policy (1991 to today):

Rates have moved swiftly at times

• In 1994, prime rate shot up 425 basis points in 13 months
• In 1997, prime rose 250 bps in 12 months
• In 2000, prime fell 375 bps in 13 months
• In 2005, prime jumped 175 bps in 9 months.
• In 2007, prime dropped 400 bps in 17 months

Rates sometimes climb in leaps, not steps

• Since ’91, there have been four instances where multiple 50+ bps rate hikes occurred over spans of six months or less

There have been periods where today’s fixed rates would have outperformed a variable

• Coming off a cyclical bottom, the average increase in prime rate has been 3.16% (that’s from trough to peak, over the last three major rate cycles)
• After these rate bottoms were made, prime rate was 1.23% higher, on average, over the next five years. Put another way, if you had picked the worst possible time to get a variable-rate mortgage (i.e., right before rates increased), your rate would have averaged 1.23% more over the following five years.

Locking in on time isn’t easy

• Traders sell bonds at the first hint that future inflation could exceed the BoC’s comfort zone. Historically, that selling has occurred anywhere from 1-6 months before increases in prime rate. When bond prices fall, bond rates rise in lockstep, which lifts fixed mortgage rates in the process.
• History has shown that it’s costly for variable-rate borrowers to wait for the first increase in prime rate before locking in. Fixed rates have often risen 50 bps or more leading up to initial rate hikes. Waiting for the 2^nd increase in prime is even more costly.
• Folks also have to remember that conversion rates are almost always higher than regular mortgage rates. Due to breakage penalties, discharge fees and aversion to change/inconvenience, lenders know that variable-rate customers are captive. Lock in today, for example, and you probably wouldn’t get 2.94% on a 5-year fixed. You’d get 3.09-3.19%, if you’re lucky.

Of course, 22 years of rate history doesn’t tell us what will happen next year, or the year after. The message here is more of a reminder not to overestimate our rate timing ability.

A strategy based on locking in after the first BoC rate increase is usually counterproductive. When the difference between fixed and variable rates is as tight as today’s 39 basis points, most rate-lockers would be better off with a low fixed rate from the get-go.

It also doesn’t help to use rising bond yields as a signal to lock in. The problem there is that the bond market creates more fakeouts than Barry Sanders in his prime. A 75-basis point upmove in the 5-year yield could easily be followed by a 75-basis point drop, leading you to lock in for nothing.

********

For the record, our sense is that rates won’t rise materially for several months—and when they do, it should be a gradual incline. But that is more of an educated guess than a useful conviction.

When inflation threats eventually appear, they could surprise the market and force bond traders to rapidly reverse their positions. When investors rush to dump bonds, fixed rates can climb like an F-35 on takeoff. And if this were to happen in the next year or so, fears of a deflating “bond market bubble” could intensify this selling.

In short, believing we can lock in “at the right time” is overoptimistic, to put it mildly. Variable and short-term mortgages are indeed the best fit for some borrowers, but anyone with visions of saving ½ point in a variable and then converting to a fixed should get acquainted with history.

Julia Thomson hasn’t won the lottery. She hasn’t been reunited with a long lost, fabulously wealthy, and remarkably generous uncle. And she hasn’t discovered oil in her backyard. All of which is surprising, considering this declaration: “We paid off our mortgage in four and a half years.”

When Thomson and her husband were approved for their first mortgage, they didn’t have any assets, but they did have a desire to be mortgage-free as soon as possible. According to her, as well as experts from banks and consumer agencies, first-time homebuyers can take a few steps to ensure that their mortgage is manageable.

Tip #1: Buy the house you can afford

Don’t confuse your budget with your bank’s budget, says Thomson.

“Going in for our mortgage, I was astounded at how much we were approved for. The bank approved us for an amount high enough that it scared us.”

Julie Hauser, of the Financial Consumer Agency of Canada, confirms that homebuyers need to budget realistically. “Make the right decision for your own needs,” she advises.

Eventually, Thomson and her husband decided to buy a house far less expensive than what the bank would have allowed, and their decision meant they could sacrifice less and pay the mortgage off faster.

Tip #2: When budgeting, consider flexibility on amortization, monthly expenses and financial goals

This year, the maximum amortization on high-ratio-insured mortgages was reduced from 30 years to 25. Colette Delaney, executive vice-president of Mortgage, Lending, Insurance and Deposit Products at CIBC, notes that while this will increase the monthly payment on a mortgage, it will also help homeowners pay it off sooner.

“You can give yourself added flexibility on your amortization by establishing a 25-year mortgage, and then increasing your regular payments to help you reduce that amortization as you begin paying down your mortgage. Should you later need to reduce your payment temporarily – for example, as you welcome a new baby into the family – you can reduce your payment while remaining within your 25-year amortization,” she says.

And, of course, don’t forget to calculate your monthly expenses, possibly with the help of a financial advisor, to make sure that your payments stay within your comfort zone.

“Your mortgage payments should fit your life – you shouldn’t have to fit your life into a mortgage payment,” Delaney says.

Tip #3: Take the time to get pre-approved

Now more than ever, it’s important to get pre-approval before you even start house hunting. Delaney explains how preapproval will ensure you’re within the ratios for an insured mortgage:

“A pre-approval gives you a guaranteed rate before you begin the process of looking at properties, and allows you to uncover any items that could be an issue for you later in the process,” she says. “For example, if you need some additional documentation to support your income or need to finalize arrangements for your down payment, a pre-approval conversation would identify those issues and give you the time to address them before you make an offer on a property.”

Finally, if new homeowners are looking for tips after they’ve secured their mortgage, Thomson has a big one: “Prioritize it.

“It hurt, but we did it,” she says, remembering large lumps of cash leaving her bank account the week after Christmas. She doesn’t have as many pairs of shoes as she would have otherwise, she admits. “But we weren’t paupers – because we prioritized our mortgage.”

And at least she has bragging rights to having paid it off in four and a half years.

Canada’s financial regulator will release new guidelines for mortgage insurers early next year, including the government’s Canada Mortgage and Housing Corp. – but they won’t drag down the housing market as much as the guidelines for banks have, says the country’s banking watchdog.

The Office of the Superintendent of Financial Institutions will outline what standards it expects the country’s three mortgage insurers to follow when they underwrite a policy on a home. Ottawa has just recently given OSFI the job of overseeing CMHC, a federal Crown corporation that is the largest player in the industry; it was already regulating two private-sector rivals, Genworth MI Canada and Canada Guaranty.

The mortgage guidelines that OSFI released for banks this summer are believed to have played a role in the decline in national home sales for the second half of this year. The new rules pushed lenders to be more cautious in areas such as background and credit checks on borrowers, document verification, and appraisals. The biggest impact is believed to have come from one particular rule that capped the amount that any individual can borrow on a home equity line of credit at 65 per cent of the home’s value.

“I would not expect the same impact” from the rules that OSFI intends to create for mortgage insurers in the new year, Julie Dickson, the regulator’s superintendent, said in an interview.

The final guidelines for banks came out in June. That was shortly before Finance Minister Jim Flaherty tightened up mortgage insurance rules, including cutting the maximum length of insured mortgages to 25 years, in an effort to stem the growth of consumer debt levels and house prices.

While Mr. Flaherty is focused on the risks to the broader economy, Ms. Dickson is responsible for ensuring that the country’s banks, insurers and mortgage insurers remain financially sound. Unlike Mr. Flaherty’s changes, the guidelines that she will release are more likely to focus on the things that mortgage insurers must do behind the scenes to assure that they are not taking on too much risk when they insure homeowners’ mortgages.

“We are in a market where there is a lot of growth in household debt, some froth, and I think whenever you see that you have to act early and try to ensure that people aren’t forgetting sound practices,” Ms. Dickson said.

“Having buttoned-down mortgage underwriting policies does slow things down a bit, so that if mortgages are presented that are outside the policy, [the financial institution] is going to have to take more time to consider it; that does have an impact.”

OSFI is taking action in this area after the Financial Stability Board, an international body made up of regulators and banking experts around the world, suggested that all countries review their rules for banks and mortgage insurers.

The board is chaired by Bank of Canada governor Mark Carney. It suggested, among other things, that mortgage insurers be regulated. Mr. Flaherty moved to put CMHC, which dominates the mortgage insurance business in Canada, under OSFI’s authority earlier this year.