Recently, the Federal Government’s new mortgage ‘stress-test’ rules have been put in place. These rules were set to help stabilize Canada’s housing market and ensure that Canadians can afford to pay their mortgages even if rates were to increase.

What this Means for You

Canadians must now be able to show that a higher mortgage rate (about 2 per cent higher) will not affect their ability to afford a home (mortgage payments and other costs related to home ownership). Qualifying at this increased interest rate translates to an 18 per cent decrease in total mortgage amount.

Although some worry that they will not have as much purchasing power as they did before, this change will ensure that what they do buy will be within their means. If this rule changes the type of home you hope to afford, you were probably planning on buying at the top of your budget.

Who Will this Affect?

This rule will affect first-time home buyers whose down payments are set to be below 20 per cent. The biggest impact will be on the condo market where most sales are below $1 million and first-time home buyers are plentiful. Some argue that condominiums are the main target of this new federal rule. This will not affect any home buyers looking for homes above $1 million dollars, as these homes already require a 20 per cent down payment and are uninsured.

This change was implemented to create a positive impact on the buyer’s future personal finance. To ensure that you are living within your means, this new rule can be a good guideline on what you can comfortably afford. It can be an appropriate measure to safeguard your home and your finances.

Why the Change?

The Federal Government hopes to stabilize Canada’s housing market and keep housing prices realistic. The hope is that these changes will bring some normalcy; it is expected that the change will lower the number of bidding wars as budgets will be more realistic and there will be a cap on people’s ability to place higher bids.  The idea is that households should be able to borrow an amount of money that they can handle and have suitable mortgages. Taking a closer look on what is affordable, and buying within your means.

If you have any questions about what this new change will mean for you, do not hesitate to give me a call at 426-921-1112.  I am always happy to help.