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Ben Sage, Moving Woodstock

Upcoming Mortgage Changes affecting ALL CANADIANS who have a mortgage!

Posted on December 4, 2017 by Ben Sage in Woodstock Real Estate

The only constant is change. So, on that note, here we go again!

What’s the change this time?

Well, other than some behind the scenes stuff that lenders will have to change, with respect to their balance sheets, etc, the one GLARING change that will effect virtually every home buyer who requires a mortgage, is that all borrowers looking for a mortgage will now have to face a “stress test” to determine whether they can afford their mortgage payments, should interest rates inevitably rise.

What does that mean, exactly?

Well, prior to this change (effective for all deals written after January 1st, 2018), only those borrowers who had a “high ratio mortgage” were required to qualify under higher than contract rates. With the new change, even borrowers who are putting in excess of 20% downpayment on their purchases will be required to qualify under the higher of either the Bank of Canada benchmark rate, or their contract rate plus 2%.  To be clear, the RATE itself isn’t going up, but the borrower must be able to prove that they can withstand payments at that higher rate.

The practical impact of this change, is that it will erode the buying power of purchasers.  Some estimates state that it will remove 20% of buying power from those searching for mortgages.

As for how this may impact the market in the long term, it is really hard to predict.  Time will tell, but these new rules are certainly something that we are keeping an eye on!



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