Finance Minister Bill Morneau yesterday announced new mortgage rules that include more stringent "stress testing" for borrowers who take out insured mortgages. Effective October 17th, 2016 all insured mortgage applications will be qualified on the benchmark rate, which is currently 4.64%, and not the applicant's actual mortgage rate. This rule was already applicable with variable and fixed mortgages with terms of 1-4 years. The government wants to be sure that borrowers can withstand any increases in mortgage rates when their mortgages come up for renewal.
What are the implications? If you are currently looking to buy a home in a specific price range and are pushing your budget to the limit, you should try to apply before the deadline. Otherwise you might need to plan on purchasing a home that costs less, or save up a larger downpayment. Overall, the Canadian housing market is strong, although there are definite regional variations, and it remains strong because of our stringent mortgage requirements. Mortgage default continues to be low in Canada.
Ultimately the best course of action is to buy a home when you are financially ready, without trying to time the market. Home ownership has proven to be a solid long-term investment. And, of course, seek out the help of a mortgage professional. It's never been more important to get expert mortgage advice that is tailored to your unique situation and local housing market. You also want to have access to as many mortgage options as possible, which is another one of our strengths. If you are in the "saving up" stage of preparing for homeownership, now is the time to meet. There are many strategies available to help you achieve your dream of homeownership. We'd be happy to discuss these strategies and develop a plan that will work for you!