Canadian Mortgage Changes Update
Some first-time Winnipeg homebuyers will likely have to settle for less expensive homes because of more stringent mortgage-insurance rules that came into effect in October.Some first-time Winnipeg homebuyers will likely have to settle for less expensive homes because of more stringent mortgage-insurance rules that came into effect in October.
Federal Finance Minister Bill Morneau announced a number of changes to Canadian mortgage rules, including a requirement all insured mortgages must undergo more stringent stress tests to determine whether borrowers would still be able to make their payments if interest rates rise.
The changes took effect Oct. 17 and are designed to stabilize the Canadian housing market in the face of soaring prices in red-hot markets such as Toronto and Vancouver. It means anyone applying for an insured mortgage must qualify using the Bank of Canada’s five-year benchmark interest rate (4.65 per cent) instead of the previous market rate for a five-year mortgage, which is as low as 2.39 per cent.
On a $300,000 mortgage, that higher rate adds an extra $356 to a monthly mortgage payment, First-time buyers tend to shop for homes at the upper end of their pre-qualified price range. Under the new rules, they may not qualify for a mortgage on a home at the upper end of their price range.
A lot of first-time homebuyers may have to adjust their buying plans as a result of the more stringent guidelines.
Peter Squire, residential market analyst for the Winnipeg Realtors Association, said the impact here will be more muted. It could result in some buyers postponing their purchase until they’ve saved up a bigger down payment, rather than settle for a less expensive home that doesn’t have the features they want, he said. If enough of them do that, it could slow down the market.