History of Mortgage in Timeline

A mortgage is a loan secured by real property, allowing borrowers to purchase property or raise funds for other purposes. The lender has a lien on the property, enabling them to seize and sell it if the borrower defaults. Originating from the Law French term "death pledge," the mortgage ends when the loan is repaid or the property is foreclosed. Essentially, a borrower offers collateral in the form of property in exchange for a loan. Mortgage rates, terms, and loan types vary widely depending on the borrower's creditworthiness, the property being mortgaged, and the overall economic climate.

1946: Creation of CMHC

In 1946, the Canada Mortgage and Housing Corporation (CMHC) was created by the Canadian federal government to address the post-war housing shortage and help Canadians achieve homeownership.

1977: Building societies dominance declining

From 1977, building societies' share of new mortgage loans in the United Kingdom began to decline, falling from 96%.

1987: Rise of banks and institutions in the UK mortgage market

By 1987, banks and other institutions had increased their share of the new mortgage loans market in the UK to 36%, while building societies' share fell to 66%.

2003: Stamp duty removal

In 2003, the UK Finance Act 2003 removed the dual application of stamp duty in Islamic mortgage transactions to facilitate their use.

2004: Mortgage systems comparison

In 2004, a UN study compared mortgage systems in Germany, the US, and Denmark. German Bausparkassen reported 6% interest rates over the past 40 years, plus additional fees. US fixed-rate mortgages, which started at rates in the tens and twenties in the 1980s, also reached about 6% per annum but had gross borrowing costs of 10.46%. Denmark's rates fell to 6% per annum, with additional risk and acquisition fees.

2007: Covered bonds market volume

At year-end 2007, the covered bonds market volume in the European Union amounted to about €2 trillion, with Germany, Denmark, Spain, and France each having outstandings above €200 billion.

2007: Popularity of fixed-rate mortgages

From 2007, fixing mortgage rates for short periods became popular in the UK, with initial periods of two, three, five, and sometimes ten years being fixed.

2007: Subprime Mortgage Crisis

In 2007, the US mortgage sector experienced the subprime mortgage crisis due to unsound lending practices.

July 28, 2008: US Treasury attempts to kick start market

On July 28, 2008, US Treasury Secretary Henry Paulson announced that the Treasury, along with four large US banks, would attempt to kick start a market for covered bonds in the United States.

October 10, 2008: Soros promotes the Danish model

On October 10, 2008, George Soros promoted the Danish mortgage market model in The Wall Street Journal.

2008: Financial crisis

The 2008 financial crisis highlighted regulatory failings in the customer-facing aspects of the residential mortgage sector.

2010: Foreclosure Crisis

In 2010, the US experienced a foreclosure crisis, which stemmed from the subprime mortgage crisis of 2007.

2012: Consideration of privatizing CMHC

In 2012, the Canadian federal government considered privatizing the Crown corporation, CMHC.

2013: Fixed-rate mortgages popularity range

From 2007 to the beginning of 2013, between 50% and 83% of new mortgages in the UK had initial periods fixed in this way.

2013: Establishment of FCA and PRA

In 2013, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) were established in the UK to address regulatory failings highlighted by the 2008 financial crisis.

April 2014: OSFI Releases Mortgage Insurance Guidelines

In April 2014, the Office of the Superintendent of Financial Institutions (OSFI) released guidelines aimed at tightening standards around underwriting and risk management for mortgage insurance providers in Canada. OSFI stated that the guideline would "provide clarity about best practices in respect of residential mortgage insurance underwriting, which contribute to a stable financial system."

October 2016: Introduction of Mortgage Stress Test in Canada

In October 2016, Canada introduced a mortgage stress test to cool down real estate prices. It requires borrowers to qualify at a rate not lower than a stress rate set by the Bank of Canada, lowering the maximum mortgage amount for all borrowers.

May 2018: Stress-test rate peak

In May 2018, the mortgage stress-test rate consistently increased until its peak of 5.34%.

July 2019: Stress-test rate decrease

In July 2019, the mortgage stress-test rate decreased to 5.19% for the first time in three years. This decision may reflect the push-back from the real-estate industry and the introduction of the first-time home buyer incentive program (FTHBI) by the Canadian government in the 2019 Canadian federal budget.

December 2019: Review of Mortgage Stress Test Ordered

In December 2019, Canada's finance minister Bill Morneau ordered a review of the mortgage stress test due to criticisms from the real estate industry.