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Death Sentence for Extended Amortizations?

Housing commentator Garth Turner cites insider info that long-term amortizations are about to go extinct, at least where the federal government has jurisdiction. In a blog post today, he writes:


Last week the CEOs of the monster banks were given a clear message that 30-year mortgages need to be wiped away. Completely. In fact, they’ll be banned. That letter will go out next week, the result of a decision made jointly by the Department of Finance, OSFI (the bank regulator) and the Bank of Canada.

This applies to mortgages that: (a) are from lenders subject to federal regulation, and (b) have 20% or more equity. Amortizations on prime mortgages with less than 20% equity are already capped at 25 years.


If true (with emphasis on the word "if"), this news could:

  1. Increase monthly payments on new conventional mortgages by about $53 per $100,000 of mortgage, other things being equal.*

  2. Potentially impact even smaller non-bank lenders (e.g., First National, Street Capital,MCAP,…). That’s because, as Turner adds:  “Regulated financial institutions will also be prevented from buying any securities which are made up [of mortgages] with 30-year ams.”  Virtually all non-deposit-taking lenders rely on securitization and/or selling mortgages directly to banks.

  3. Make provincially-regulated credit unions the only game in town for amortizations over 25 years. That would provide credit unions who keep long-amortization mortgages on their balance sheets with another advantage versus the banks. CUs already sidestep federal mortgage rules by offering HELOCs above the federal 65% loan-to-value (LTV) maximum, higher LTV stated income mortgages and mortgages with lower qualification rates.

As noted, none of the above has been confirmed. So the above should be considered speculation until it is. via Canadian Mortgage Trends

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