To understand the innovation and change that the mortgage business in Canada underwent, we first must make sense of the changes that happened in the housing market. The business was influenced by many things including the economy, monetary policies and the real estate market. Looking at affordability measures that compare payments on houses to income show us the drastic change the housing business suffered over the last year or so. We see the same results when we look at charts portraying real estate prices, price-to-rent and price-to-income comparisons. Since late 2008 and the beginning of 2009 real estate prices have fallen, though they are now showing signs of increase. 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 read, if you would like more information on the changes within the property prices around the world.

The mortgage business and it's changes

What innovations happened within the Canadian mortgage trade? Quite a few countries chose to make little change to the mortgage market, this was not the case in Canada. With alterations to mortgage insurance in spring 2006 by the federal government the mortgage market itself was adapted. Stable bank capitalization, a sounder banking market, more pro-active central banks and other circumstances formed a solid base for the innovations to build on. We can already observe the mortgage business changing even if the banking alterations were a natural progression. Long term there is still the possibility of defaulting on a mortgage, but short term it is making real estate more affordable to many people. The innovations have had a genuine affect on the real estate slowdown of 2008, whilst not stopping it completely it certainly slowed it down.

Repayment terms on mortgages

Up to three years ago the only mortgage terms you could obtain was for 25 years. Since then those mortgage amortizations terms have been expanded to 30, 35 and 40 year mortgage periods. About 10% and less of mortgages are taken out over the 35 to 40 year period say professionals from the Scotiabank group, whilst a further 18% are for more than 25 years. Terms of over 25 years accounted for 47% of all new mortgages taken out in the last year and a tremendous 60% of these were the 35 and 40 year mortgages. Gloomily, the option of insured 40 year mortgages is no longer accessible. Along with CMHC and Genworth, AIG advertised in July 2008 this product was no longer available along with 100% loans for mortgages. But, uninsured 40 year mortgages are still available. Happy New Year from Toronto real estate agents!