The new mortgage rules that we have been warning you about have finally arrived. Global News writes that as of "January 1st, 2018, Canadians getting, renewing or refinancing a mortgage might have to prove that they would be able to cope with interest rates substantially higher than their contract rate." This stress test is to ensure that anyone applying for a mortgage could handle that mortgage, no matter what the interest rates jump to.
While this may not seem like a major deal, a recent "analysis by the Bank of Canada suggested... some 10 per cent of Canadians who got an uninsured mortgage between mid-2016 and mid-2017 would not have qualified under the new standards" (Global News). Even those able to put a full 20% down or more on their future home will be required to pass this stress test. To give a number to those who could be affected just in the coming year, "the rules will likely affect about 100,000 homebuyers, who would qualify for a mortgage for their preferred house today but will likely fail the stress test for an equally large loan next year, according a report published by Mortgage Professionals Canada, an industry group" (Global News).
Many Canadian's will have to look at homes that are approximately 20% cheaper, on average purchasing homes for $31,000 less than they would have. Of the 100,000 potential homeowners that will not qualify for a mortgage under these new rules, half will find a less expensive property to purchase and the other half will put their home-owning goals on hold, potentially indefinitely. This is going to have a significant affect on the real estate market as less homes are being purchased, particularly in the high end market.
You could be affected by these new rates if:
You are renewing your mortgage: While the rate won't be applied to you if you are renewing a mortgage, it will be applied to you if you are shopping around for a new lender with a potentially better rate. Global News warns that "In some cases, 'renewing borrowers may be forced to accept uncompetitive rates from their current lenders'."
You are refinancing your mortgage: From now on, if you wish to refinance your mortgage you will have to pass the stress test. You will not get a better rate because of what you had before.
You are applying for a new mortgage: If you are new to the mortgage game, you will have to be stress-tested.
Read more at Global News and call us today at 403-630-6363 if you have any questions about this!
Your Real Estate Professional,