NEWS UPDATE: Federal Government Raises Insured Mortgage Cap to $1.5M, Expands 30-year Amortizations
What Will The New Mortgage Rules Mean For Canadians?
Our mid-month blog has come earlier than scheduled due to the recent big news about mortgage rules changing, which are going to be discussed here.
So what exactly is happening?
Sadly, rates are going up for consumers and many people will have trouble acquiring mortgages because the housing market will change and high-ratio buyers will no longer qualify for the mortgage they want.
As of next week, homebuyers will need to go through a mortgage stress test. The test will determine whether the buyer can still make payments if rates rose to the Bank of Canada’s five year fixed mortgage rate.
That rate is an all-time high, and usually higher than what buyers can usually negotiate with banks.This test also sets a limit of no more than 39% of household income being necessary to cover home-carrying expenses such as mortgage payments, heat and taxes.
On a positive note, buyers who have already made over 20% in down payments will avoid the new rules. A writer for Canadian Mortgage Trends believes this ordeal has not been thought through and discussed and is unhappy with the new rules, suggesting it’s a “big fat mistake”. He added that regulators are under pressure to act because of the rising home prices and want to prevent a future catastrophe.
Another new problem that this will cause is the CRA’s involvement, because home sales will have to be reported to the government branch as of next year. Although they won’t be taxed, the government wants to make sure foreign buyers are not tampering around with the house market, buying and selling as they please.
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