“Mortgages in the city of Vancouver are crumbling very fast in terms of quality,” a new report indicates. That is not really the case, in the opinion of one of the broker operating in the market.
A new Better Dwelling article about the real estate market in Vancouver says the quality of mortgage in the city is falling. “High-ratio mortgages put together with high loan-income ratios are a perilous mélange for homeowners,” the article states. “A high-ratio mortgage is one in which not up to 20 percent is placed as a down payment, and the owner has as small as 5 percent equity in the income. Chances of these mortgages going under waters that are homeowners in the end will experience negative equity in the home, and are already quite high.”This is becoming even more of a problem when added with a high loan to income ratio.” The increasing rate as argued by the article would make things not possible for several purchasers to afford their mortgage payments.
In the opinion of Dustan Woodhouse, a potential rise in rates has already been accounted for with previous year’s mortgage rule fluctuations. “It is a high ratio purchaser with a 4.64 percent stress test rate of interest. They are already pre-qualified at interest rates greater than 2 percent above the present rates. On today’s earnings, they are stress test at much increased rates at their current earnings,” he said. The moment we actually move to a 4.64 percent interest rate, the huge majority if those purchasers will have seen their earnings do not even require to rise to debt services 4.64 percent interest rate due to the fact that they are pre-qualified.”
It indicates the Bank of Canada and the ministry of finance have statistics that prove the quality of high ratio loans are crumbling in the city of Vancouver. “The financial year ending in 3Q of last year met high-ratio mortgage with an average LTI greater than 35 percent, and more than 75% of Vancouver’s postal codes,” it states. “This is an 11 percent rise from the time prior, which is very strong growth. Unfortunately, this is not the kind of growth that is good.”