Startling changes were released yesterday by the Federal Government regarding the Canadian housing market & mortgages. As of October 17th, finance minister, Bill Morneau says Ottawa will enforce new mortgage rules, which will affect how borrowers are approved. This new mortgage “stress test” will force insured borrowers to be approved at the Bank of Canada benchmark rate instead of the actual mortgage rate we can obtain for them. This was not a requirement for 5 year (or more) fixed rates previously. This is important to recognize because it continues to be a very popular term that buyers choose for their mortgage.
This could severely impact high ratio buyers. The posted Bank of Canada rate is currently sitting around 4.64% which is almost double what the current 5-year fixed rates are. This significant qualifying rate increase could and would definitely throw off the debt ratios of those trying to apply for a mortgage and jeopardize their approval.
New changes have also been announced that will affect foreign buyers. The government is taking steps to stabilize the housing market by changing rules around capital gains exemptions for foreigners. Previously, foreign buyers, like Canadians, were also exempt from this tax upon sale of their home. In order to still be exempt, buyers will now have to be using their home as their principal residence.
Call us today to find out how this will affect you & your home buying dreams. We’re always here to offer advice, support and service.
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To read more:
Ottawa’s new mortgage requirements could make it harder to secure a mortgage
Ottawa tightens mortgage requirements and targets foreign money
Ottawa’s housing reforms target foreign buyers, mortgage debt