It’s been a week since the new rule changes have taken effect and it seems the biggest concern for Canadians revolves around the new qualifying requirements for new insured mortgages (less than 20% down payment). Borrowers will have to qualify based on the Bank of Canada posted 5 year rate which is currently 4.64%. This means that most borrowers will have approximately 20% less buying power and/or simply not qualify for the home they once thought they could.
The Canadian government has kept a watchful eye on the pace at which real estate prices have increased over the last several years and it has also been concerned with the exposure it currently has in the housing market through its wholly owned Canadian Mortgage and Housing Corporation (CMHC). It is clear now that these new steps are meant to ease the risk that the governments feels exists in both the housing market and mortgages that are insured through CMHC. Finance Department spokesman Jack Aubry states “in the short-term, the change may lead to a temporary reduction in the pace of housing market activity”.
While some of these changes might make some sense, it does create more challenges for specialized mortgage lenders who use bulk insurance to securitize their portfolio of mortgages. This will mean less choice for consumers and that’s never a good thing.
The government has also changed rules that are meant to close loopholes regarding primary residences. They expect the changes to slow down the participation of foreign buyers in the housing market which is contributing to the extensive rise in prices in Vancouver and Toronto.
There is confusion with regards to the rule changes as some lenders cancelled product offerings only to reintroduce them back in the same week. The true certainty is that only a mortgage professional, like myself, is equipped with all the options. I have access to a wide selection of mortgage products, lenders, and strategies that ensure you get the right mortgage for you.
Now more than ever, you need the Right Broker on your side.