VANCOUVER (NEWS 1130) – Even if you’ve been loading up the piggy bank in an attempt to buy your first home, proposed changes to mortgage rules could make that more difficult. The federal banking regulator is looking at increasing the so-called “stress test” in an effort to cool hot housing markets like Metro Vancouver.
Keith Roy with RE/MAX Select in Vancouver says for potential buyers right on the edge of qualifying for a mortgage, this could be the final barrier to home ownership.
“If you’re a first-time buyer and you’re just barely getting going in your career, you’re going to make more in the future, and you stretch to buy that condo that you want to buy, you’re going to have less purchasing power now,” he said.
Roy acknowledges there is some prudence at play here, as some buyers are stretching themselves to buy and perhaps taking on difficult loans.
“The people who are going to be most negatively impacted by this are buyers who want to buy entry-level products. At the same time, that means you’re going to see a negative impact on people with lower-end condos, maybe, or townhouses in the Lower Mainland,” he said.
Roy says sellers of those homes might find themselves with fewer potential offers.
The proposal from the Office of the Superintendent of Financial Institutions would set the qualifying rate for uninsured mortgages at the contracted rate plus two percentage points or 5.25 per cent, whichever is higher.
That’s a change from the current rules of the bank rate plus two percentage points or the Bank of Canada’s five-year benchmark rate, which currently sits at 4.79 per cent.
Any buyer whose down payment on a home is less than one-fifth of the purchase price must undergo the stress test to demonstrate they could still afford mortgage payments in a higher-rate environment. The measure adds a margin of safety for borrowers.
Roy says people in our region need to ask themselves how far east they are willing to move.
“We just keep asking that question and people just keep going farther and farther east, if they want to be able to purchase something. Because that’s how our pricing works,” he said, adding it might full-on prevent some people from ever being able to access a home.
With files from the Canadian Press