Proposed Mortgage Rules Will Reduce Your Home-Buying Power

As reported by the Huffington Post.  


A proposal by Canada's banking regulator to expand "stress tests" for mortgage borrowers will reduce how much house Canadians can afford by 21 per cent, says a new report from mortgage comparison site Ratehub.


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.

"If implemented in their current form, the effects of these changes will be significant. When buyers can qualify for less mortgage financing, it puts significant downward pressure on home prices," Laird said in an email to HuffPost Canada.


"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."


Canada's federal banking regulator, OSFI, has proposed a "stress test" for borrowers of uninsured mortgages, where the borrower puts 20 per cent or more down. That follows a new rule introduced last fall which requires borrowers who put less than 20 per cent down to pass a similar stress test.


About 46 per cent of mortgages outstanding in Canada are uninsured, with a 20-per-cent or more down payment, according to DBRS.

A household with an annual income of $100,000 and a fixed-rate 25-year mortgage at 2.84 per cent can afford a house worth up to $726,145 currently, Ratehub calculated.


Under the new rules, the same household would be able to afford only $573,791, a reduction of more than $150,000. Full article at the link below.


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