If you own a home in Canada, are currently house-hunting, or are looking to buy sometime in the near future, you’ve no doubt been following the news closely for the past few months. As soon as word hit that the Office of the Superintendent of Financial Institutions (OSFI) would be introducing new mortgage rules at the start of 2018, people started scrambling to understand what this would mean for them and their home purchases.
Now that January is here, and the new mortgage regulations have been implemented, you may be feeling more confused than ever. Read on to learn more about the new mortgage rules introduced on January 1, 2018, and how they might affect you this year:
What Are The New Rules?
There are a number of changes but the one garnering the most attention, and the one that will affect the most people, is the introduction of a stress test for all mortgage applicants. Now, regardless of the size of their down-payment, home buyers will have to show that they can afford their mortgage payments should interest rates increase. Under the new mortgage “stress test”, potential home buyers will need to qualify for a mortgage at a rate either 2% higher than the mortgage rate they qualified for, or at the Bank of Canada’s ‘benchmark’ rate.
Why Are The New Rules Being Introduced?
While taking into account the rapidly rising prices seen in the Canadian real estate in the past few years, the new rules are aimed at cooling the housing market and keeping things under control. In the past decade, Ottawa has made six regulatory changes to the mortgage market in an attempt to limit the amount of debt taken on by Canadians and financial institutions in Canada.
Who Will Be Most Affected?
The new mortgage rules will likely affect around 100,000 Canadian home buyers, as well as those looking to refinance their mortgages in 2018. Home buyers will have less purchasing power than they would have done before the rules were implemented on January 1st .This could mean that home buyers will have to settle for a less expensive home than they had originally anticipated, or will have to wait to save up a larger down-payment. Homeowners looking to refinance their mortgage in 2018 will have to qualify according to the higher stress-state rates rather than the actual mortgage rate. This means that homeowners may have to settle for a smaller mortgage.
The team at Capital Mortgages happily extends our services to help you understand the 2018 mortgage rules and how they will affect you, your family, and your finances. We have summarized the new rules as best we can in this blog post for you but, should you have any further questions, please do not hesitate to reach out and speak with one of our experienced mortgage brokers today.