Just when you thought that it couldn't get worst, it's about to. The government of Canada is predicted to approve yet more mortgage rules to slow down the market. OSFI (The Office of the Superintendent of Financial Institutions) proposed new guidelines that include stress tests for uninsured mortgages. These are mortgages where you put 20% down or greater. They have not told us when this will happen but only that it will likely happen this Fall.
Curious how this could affect you? Let's assume that you are qualified to purchase a $1,000,000 home (which really doesn't exist in Vancouver). OSFI wants to ensure that you can afford a larger payment in the event the mortgage rates are higher, at the end of your mortgage term, which is generally 5 years. I think this is a VERY good idea but it makes qualifying much harder. The "stress test" has been around for a while, previously for a line of credit, variable rate mortgage, and open mortgage qualification. Following this, it was introduced to high-ratio buyers, meaning that there is less than 20% down payment. Now they want to introduce it to everyone, to be fair, of course.
Essentially, you will lose 20% of your purchasing power. This will substantially affect buyers and sellers. If you are considering listing your property, DO IT FAST. If you are considering buying and are tight with qualifying, DO IT FAST.
When this kicks in, we expect the market to "adjust" for an unknown period of time. If you thought that you couldn't anything now, just wait until this kicks in.
"Persistently low-interest rates, record levels of household indebtedness, and rapid increases in house prices in certain areas of Canada (such as Greater Vancouver and Toronto), could generate significant loan losses if economic conditions deteriorate," OSFI wrote in a public letter found here: http://www.osfi-bsif.gc.ca/Eng/fi-if/in-ai/Pages/rfmrm.aspx
What really bugs me is that mortgages help Canadians buy an asset that appreciates (over time) and the government wants to restrict this. However, they have zero problems with banks giving away 19.99%+ credit cards to kids like candy.
I would love to hear what you think?
Own your life,
Jessi Johnson Vancouver Realtor & Vancouver Mortgage Broker