It turns out, in the opinion of our Mortgage Insurers that is, that the best way to make lending practices more prudent is it should cost people MORE to borrow Cheap Money.
Did we lose ya just then? Sorry...it is a bit confusing - we understand.
Here, try this angle - Borrowing Money today is cheap because interest rates are cheap, relatively speaking. I mean, we were just featured on Global News Last week because of our 5 year Mortgage at 2.59% (Now at 2.54%!!).
BUT - even though borrowing money is cheap due to interest rates...the guys that protect the Lender's Money, the Mortgage Insurer (think CMHC, Genworth, Canada Guaranty), have unanimously decided that it should cost the consumer more money to insure the mortgage...for the lender.
What????? Didn't they already increase this like 6 months ago?? Why are they doing it again?!
We hear you. Yes, they did just do this around 6 monhts ago...and as for why they are doing it again...it's because they gotta get the "economies of scale" balanced. Yeah, we know - that's a lot of fancy talk right there...so what the hell does that mean?
You see when something is cheap and desired...it can only stay cheap for so long before the price has to go up.
Mortgage lending is cheap, and the prices of homes has gone up and up and up because people are willing to pay more for a home because they can borrower large amounts of money for less cost (remember, the interest rate is simply the price tag and the interest accumulated is the actual cost for the money you borrow).
When it comes to mortgages - when a person has less than 20% to put down on a home - they must insure their mortgage in case of default. It's non-negotiable.
We like to joke that this is just another cost to live in a free country...but it's no longer funny. Now it's just insulting.
Sadly - you can't fight city hall. In this case - you can't fight the insurer. The decision was made - and now we have to adapt.
Keep on Keepin' On.
Want to call and bitch about it? We've got the direct Number to each Insurere...just ask! We'll be happy to provide it to you!