This article will help to clarify a few the key points about the new Canadian rules for mortgages. These new rules will begin in January 2018. Unfortunately, it will be more difficult for many Canadians to obtain a mortgage in 2018. The reason for this is due to the introduction of 3 new mortgage lending rules from the Superintendent of Financial Institutions. The Superintendent of Financial Institutions is basically Canada’s banking regulator.
These new rules, sadly to say, will primarily affect people who are second or third time home-buyers. These home-buyers may not be able to afford the bigger property they have had their eye on for a while now. Beginning on January 1, 2018, the OSFI (Office of the Superintendent of Financial Institutions), will introduce a minimum qualifying rate for all prospective home-buyers. It is to be called a stress test and it will affect even home-buyers who have a down payment of 20% or higher.
Previously, a stress test was only given to home-buyers who had less than a 20% down payment. Simply put, it really does not matter how much money you save up for a down payment because if you do not qualify and pass the new stress test then the financial institution will not provide you with a mortgage. This new mortgage stress test means that a potential home-buyer will need to qualify by obtaining a stress test rate that will be greater than the financial institutions two key indicators.
This new format will affect both sellers and home-buyers. It will target the fastest-growing segment, uninsured mortgages, in the Canadian mortgage market. This strict stress test has been introduced so that a home-buyer will have the ability to pay their mortgage even if interest rates go higher. Once in effect, it could mean that a families purchasing power could be reduced by up to 21%.
Many economists are warning that these stricter rules for mortgages will have a negative impact on housing markets across the country. These mortgage rules, once implemented, could depress Canada’s housing market demand by up to 10%. The bottom line is that if you own a home and want to refinance or are considering purchasing a home then negotiating a mortgage will be a lot more difficult to do.
Unfortunately, these new rules will mean that second and third time home-buyers may need to wait longer before purchasing a new home. It may also alter your decision to purchase a detached house. You may now need to look at other alternatives such as condominiums, townhouses, or apartments.
If you are still confused about the new mortgage rules or if you have any further questions regarding them, Agent Olena is here to help! If you are looking to buy a new home in the Toronto area, Olena is experienced and knowledgeable when it comes to mortgages. Olena will walk you through and educate you on the home buying process, making a very stressful situation a little bit easier to digest. She will be there for you every step of the way and you can always rely on her when you have any questions about real estate!