From pennies to old age pensions, yesterday’s budget was full of unexpected quirks. What wasn’t surprising to best rate mortgage brokers was the government’s discomfort with the Canada Mortgage and Housing Corporation. Ottawa has voiced concern over the activities of the Crown corporation for months now, threatening to toughen its oversight of this important economic organization. Yesterday, the budget took aim at the CMHC, which controls about 75% of the mortgage default insurance market. Currently, CMHC is backstopped by the federal government; however, the organization is coming close to a mandated limit of $600-billion thanks to a sizzling housing marketing and the proliferation of bank-offered portfolio insurance packages (for more background information on this issue, review our article “CMHC Backing Fewer Loans: A Look at the Repercussions“).
According to the budget, “the government will introduce enhancements to the governance and oversight framework of the Canada Mortgage and Housing Corporation.”
What The Budget Says
The federal document provided few details about the proposed “enhancements”, choosing instead to highlight concern about the Crown corp.’s dealing with the nation’s big banks and how it could impact the economy as a whole. The budget proposes legislative amendments to “strengthen oversight of CMHC and to ensure its commercial activities are managed in a manner that promotes the stability of the financial system”.
Mortgage Talk will continue to follow this story as information becomes available.
Budget Won’t Bust Home Builds
While the CMHC may be in headed towards change, the Canadian Home Builders Association remained optimistic following yesterday’s budget announcement.
The budget points out the important role that home building plays in the economy and the well-being of the nation’s housing market. According to CHBA President, Ron Olson of Saskatoon, this year’s budget “is a practical budget that sets the stage for future economic renewal, while delivering worthwhile measures.” Olson says that the CHBA is pleased that the Finance Minister has resisted tightening amortization and down payment rules at this time in order to ensure best rate mortgage products. “This type of intervention would have prevented thousands of first-time buyers pursuing their dream of homeownership.”
Other Highlights from the Budget
The budget was all about propping up business and shaving off government slack in an attempt to curb spending and whittle down the deficit.
Highlights of the budget include:
- Cancelling the penny – production will end this fall, saving $11 million a year.
- Business stimulants include $1.1 billion in R&D funding, plus $500 million for venture capital and $205 million in small business hiring credits.
- Youth job skills training will receive $50 million over two years.
- Leaner government operations will result in spending cuts of $5.2 billion by 2014-15.
- Elimination of 19,200 federal jobs, 4.8 per cent of the workforce, to cost $900 million.
- Federal employees will be required to make higher pension contributions and, after the next election (2015), MPs and senators may pay a higher pension share.
- CBC’s $1.15-billion budget will be cut by 10 per cent over the next three years.
- Eligibility for Old Age Security rises to 67, beginning in 2023.
- Employment Insurance reforms include $482 million over two years for work incentives.
- Duty-free cross-border shopping limits increase this summer to $200 for 24-hour trips and $800 for trips of 48 hours or more.
- The current deficit of $21.1 billion is projected to disappear by 2015.
Readers can also get a quick glimpse of important features via this infographic from the Globe and Mail.