Millennials & The Mortgage Rules

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One Year Check-In

Millennials & The Mortgage Rules

The Department of Finance introduced new rules aimed at controlling insured mortgage loans almost one year ago, on October 3rd, 2016. These rules targeted buyers who were supposedly taking on more debt than they could afford and were meant to slow the insured mortgage space.

Rule changes included a mortgage “stress test” that required insured borrowers to qualify at the Bank of Canada posted rate, instead of their contract rate. This rate is currently 4.84% but can also change depending on the lender. The new rules also targeted lenders, mostly monolines, who bulk insure their mortgages. A year later, we have statistics that inform us of the impact of these rule changes.

According to Genworth Canada, one of Canada’s biggest insurers, the total amount of new insurance written was down 81% (Canadian Mortgage Professionals [CMP]). Canada Mortgage and Housing Corporation (CMHC) further confirmed this statistic, saying the insured mortgage market was down about 33% year over year. More in depth numbers revealed that CMHC, “provided 78,607 units of mortgage insurance in the three month period ending June 30… [compared to] 117,463 units during the same period,” one year prior (CMP).

Royal LePage also did a survey of millennials, and found that millennials believe the rule changes have impacted their ability to purchase a home or enter into the housing market. Many millennial buyers have decided to continue renting in order to save more money for a down payment or have adjusted their housing expectations (CMP).

49% of millennials surveyed by Royal LePage think that these rules have forced them to wait to enter the market, or consider lower priced homes. 64% of millennials in Canada believe that housing in their area is unaffordable, and in Toronto, this number is higher at 72%. These statistics also say that roughly a quarter of millennials surveyed said they do not quality for a mortgage (CMP).

These rules seem to have only impacted those who were scraping by to get in the market in the first place, placing their dreams out of reach. They have derailed many millennials and their plans to get into homes, or at least, homes they want to be in.

What do you think? Let us know in the comment section below.

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