Cash Back for Down Payment to go the way of the DODO Bird

A source at the bank confirms that it is scrapping the offer in light of banking regulator OSFI’s B-20 Underwriting Guidelines.

OSFI has decreed that “Cashback should not be considered part of the down payment.” Most Federally regulated lenders must therefore eliminate these offerings no later than October 31, 2012.
Cashback mortgages - essentially 100% financing - are a niche product that are seldom appropriate for owner-occupied purchases (sometimes they make sense for rentals). There are exceptions, but most of the folks who want them are simply a bit too eager to buy.

The Canadian Association of Accredited Mortgage Professionals (CAAMP) supports OSFI’s call to end cash back products in lieu of 5% down payments. “Borrowers should have ‘skin in the game’,” it says.

There aren’t many federally-regulated lenders with 5% cashback down payment mortgages left, Scotiabank stopped there's September 15th, 2012 for example. Last checked; National Bank & B2B Bank were two of the banks still doing them (BMO as well I believe) & the Credit Unions ATB & Servus (but mostly at the branch level & peppered with rules & regulations). Also the Trust Company, Resmor Trust, now known as RMG Mortgages, with their smaller Cash Back options of 2% or 3% towards down payment, will also disappear as of Oct 31, 2012 Those options likely won’t be around for long. For a RMG mortgage it means you have to have a approval by October 31, 2012 or the program will not be available & you still have to qualify under the lenders rules as well as the new 25 year amortization.

Despite the above, banks (including Scotiabank) will continue selling cashback mortgages so long as the funds aren’t being used as equity, more like the current First National model.  Buyers sometimes use cash back for things like land transfer tax, lawyer's fees, moving costs, closing costs, furnishings, landscaping, renovations, and so on; but the original min 5% down has to be shown in funds up front.
cash backs are also used for refinances to 85% loan to value (the official refinance limit without cash back is 80% loan to value on insured mortgages).

There's a chance that a small number of provincially regulated lenders - Credit Unions, as they are not governed under OSFI,  will continue offering cash back down payment mortgages : however in the past the Credit Unions have been tougher on approvals.

If you are looking for a Cash Back Mortgage, you need to have your approval on or before Oct 31, 2012... as I do not think this will be resurrected anytime in the near future.

*information taken from Canadian Mortgage Trends Rob McLister, CMT*

 

The Bank of Canada is leaving its key lending rate unchanged at one per cent. 

The announcement came Tuesday morning, in a statement that notes the U.S. economy is expanding at a "gradual pace," indicators point to a "continued contraction" in Europe, and growth has slowed "more than expected" in China and other emerging economies.
For Canada, the statement paints a modestly optimistic outlook that singles out the rising price of commodities produced here, including oil, in recent months.
The statement notes that exports remain weak, however, and housing activity is expected to pull back from historic highs.
While the performance of the global economy has also constrained Canadian economic activity, the Bank nevertheless projects a "moderate expansion."
"Following the recent period of below-potential growth, the economy is expected to pick up and return to full capacity by the end of 2013," the BoC said, pointing to consumption and business investment as key drivers. "After taking into account revisions to the National Accounts, the Bank projects that the economy will grow by 2.2 per cent in 2012, 2.3 per cent in 2013 and 2.4 per cent in 2014."
That's a very slight revision from the Bank's July statement, in which it projected the Canadian economy would grow by 2.1 per cent this year, 2.3 per cent next year and 2.5 per cent in 2014.
"Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 per cent inflation target," the latest statement said.
The Bank also makes explicit reference to Canadians' growing credit obligations, projecting that "the household debt burden is expected to rise further before stabilizing by the end of the projection horizon."
In that light, the statement released Tuesday makes clear, for the first time, that the central bank will consider the state of Canadians' household finances before increasing its trendsetting interest rate.
"The timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of imbalances in the household sector."
In recent years, the Bank's consistently low overnight lending rate has meant Canadians have enjoyed relatively cheap access to cash.  While that's stimulated the weak economy, it has also contributed to record levels of household debt across the country.
In a recent revision of economic date, Statistics Canada pegged household credit-market debt at 163 per cent of income -- a level similar to that of the U.S. ahead of the 2007-08 housing market crash.