Coming January 2018 you may not qualify to buy the house you can afford now Mortgage stress test may cut down as much as $150K of your buying power. Qualifying for your next mortgage (2018) just got a lot tougher.
Mortgage changes coming January 2018. For many this may be the last chance to buy a house they dream of.
The head of Ontario's real estate association says governments across Canada have unintentionally launched a "war on first-time homebuyers," and is calling on policymakers to "hit the brakes" on another round of proposed tightening of mortgage lending rules
Under rules introduced last fall, borrowers who put down less than 20 per cent on a home have to qualify at a mortgage rate that is some two percentage points higher than current offered rates.
The industry is worried about this latest mortgage move, as it affects a majority of new mortgage issuances in Canada. Tim Hudak, the head of the Ontario Real Estate Association, said the cumulative effect of all the new rules amounts to "a war on homebuyers."
According to calculations from mortgage comparison site Ratehub.ca, the new stress test will reduce the amount of home you can afford by around 21 per cent.
Currently, a household with an income of $100,000 can afford a house worth around $706,000, assuming a 25-year mortgage at 2.89 per cent. Under the new rules, that household would only be able to afford a house valued at $571,000.
HuffPost / October, 2017
In this case, the family’s mortgage rate, plus 200 basis points, is less than the Bank of Canada five-year benchmark of 4.89%.
2017 / According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 2.83% amortized over 25 years can currently afford a home worth $726,939.
2018 / Under new rules, they need to qualify at 4.89%
They can now afford $570,970
A difference of $155,969 (less 21.45%)
MoneySense October 17th, 2017
The idea's critics, including many in the real estate industry, said imposing a stress test on all buyers would put a chill on the housing market at a time that it can ill afford it.
The stress test is designed to simulate a borrower's financial situation by assuming they would have to pay back the loan at the posted average — not whatever deal they were able to negotiate. So under OSFI's new rules, borrowers would be stress tested at either the five-year average posted rate, or two per cent higher than their actual mortgage rate — whichever one is higher.
CBC / Oct 17, 2017
One senior real estate source, who asked not to be named, said the impact of dropping prices is only at the margins. “There’s no swath of affordable new homes entering the marketplace,” he said. There also doesn’t appear to be a massive decline in prices happening in the new homes market although Toronto builders do report sales dropping.
Financial Post / August 2017
2018 / "They want to see the security of your income, how long have you been working, where you've been working. They want to make sure your debt servicing ratio is on as well, so that your payments aren't so high that you're using up everything that you're bringing in."
Ruston also said that they will take your mortgage at a certain percent, and they'll add an extra two percent to see if you'll be able to qualify with that higher interest rate.
Moose Jaw Financial 30th, 2017
Reducing affordability by that much is likely to lead to a 10- to 20-per-cent decline in house prices, said James Laird, co-founder of Ratehub. But properties worth more than $1 million will be most affected by this change, which means that Toronto and Vancouver will be the geographies most impacted.