It’s a new year and that implies that new mortgage stress test is currently active. Not a lot of people know how much this new stress test will affect them but a recent study by ReMax suggests that 37 per cent of Canadians have no idea how the changes will affect their ability to purchase a property in years to comes.
By the end of 2017, the Office of the Superintendent of Financial Institutions introduced new and tighter mortgage rules. These new mortgage rules demands borrowers that have uninsured mortgages, that is those with a down payment of 20 per cent or more, to undergo a stress test. Uninsured borrowers now have to qualify at a new minimum rate.
The stress test is serves as a safeguard for borrowers. Those who pass the test are ensured that they can afford mortgage rate hikes, however some sources are doubting that though and some actually being against the new mortgage rules.
The co-founder, ratehub.ca, and the president of CanWise Financial said ” Those of us working in the mortgage industry question if now is an appropriate time to introduce more regulation, which will cool market across the country further. We have yet to see the full impact of regulations added over the last 12 months, combined with rising interest rates. A more prudent approach would be to let these new variables work their way through the real estate markets and decide if further tightening is required.”
Also the president and CEO of Royal LePage, is very cautious with the new policy change. He stated that “It is prudent that policy makers introduce measures that help protect the housing market from runaway price inflation. However, natural supply and demand forces will always triumph over regulatory tinkering. Attempting to use public policy to steer property prices in huge, rapidly growing cities like Toronto and Vancouver is like a tugboat trying to turn an ocean liner. Consistent, measured policy can have a positive impact. Just don’t try to turn the market on a dime or you can risk sinking the ship.”
As stated by the Bank of Canada, those perspective homebuyers that have been affected already have still not suffered the consequences of the new rule, that would lead to the disqualification of 10 per cent of homebuyers.
The calculated data of ReMax’s survey was as follows. Up to about 58 per cent of participants in the survey knew about the new rules however 27 per cent of them do not believe it will affect the type of property they buy. On the other hand, 18 per cent are convinced that it will have an affect on the type of property they purchase, and 13 per cent have no idea how the new rules will affect their purchasing power.
According to Canadian Mortgage & Housing Corp. with interest rates continuing to rise in the environment, homebuyers are now purchasing in a rising interest rate environment. Interest rates increased twice last year and is predicted to continue to rise between 2018 and 2019.