In toronto real estate, new rules aimed at stimulating it harder to get a mortgage take effect today, October 17, 2016, a move that is bound to have an impact on demand for homes in Canada.
Earlier this month, Ottawa announced the moves, which boil down to a stress test for all insured mortgage applications.
It consists of testing to determine if a borrower could afford to pay back a loan if the rate becomes higher, so they judge the borrower against the five-year bank rate of 4. 64 per cent for a five-year loan — even though many lenders are currently offering mortgages at far less rate than that.
Previously, that test was merely used on certain segments of the market. But starting now, it will be in place for any insured mortgage for a buyer putting down less than 20 per cent of the price of the home up front.
The new mortgage rules aim are an attempt to rein in debt loads, which is likely to cool costs, too. By stimulating it harder to get a mortgage, demand for dwelling becomes limited, which should induce prices to plummet or at least not increase as quickly.
Mortgage brokers reported a flurry of borrowing last week as homebuyers tried to get in under the old rules.
Toronto-based broker says he envisions the new rules will have a big impact on certain segments of the market, specially for first-time buyers with small down payments.” I think that we will see first-time home buyers begin to get frustrated after the relevant rules to come down ,” he said in an interview.” It’s a somewhat significant change to how much people can afford — you’re looking at 20 to 30 per cent of reduction in the mortgage value that people take on .”
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