New Mortgage Rules Will Hurt 1/3 of Borrowers
Posted on Friday, October 7, 2016, 12:46 PM, by Amy Meerovich, under
Real Estate
New requirements for mortgage insurance will make owning a home increasingly difficult for first-time buyers. Right now, Canadian homebuyers generally need to get mortgage insurance if they make a down payment that is less than 20 percent.
The new rules, announced by Finance Minister Bill Morneau on Monday, will make it much harder for certain buyers to obtain that insurance.
1/3 of borrowers are affected.
The rules now state that all insured homebuyers undergo a "stress test" to prove that they could still afford to pay off their mortgages, even if their interest rates went up. This will also mean that first-time buyers won't be able to borrow as much as they used to, and they'll have to settle for cheaper homes. On the plus side, it will keep buyers from
amassing the huge amounts of debt that they would have had while rushing to buy a home in the overheated market.
Long-term goals
The plan has several goals including calming down the insane housing markets in Toronto and Vancouver. There have been many concerns that homes in these markets have become increasingly unaffordable for Canadians, while foreign investors buy them up and turn them around for a quick profit. Under the new requirements, home sales could fall as much as eight percent and home prices should drop by five percent.