Tougher Rules And Higher Rates: What’s Next For The Mortgage Market?

Houses back onto a park in Vaughan, a suburb with an active real estate market, in Toronto, Canada, May 24, 2017.

It all began last October, when Federal Finance Minister Bill Morneau announced several new regulations aimed at ensuring that Canadian borrowers only take on mortgages they can afford, including enforcing that all insured borrowers qualify for loans based on the five-year posted mortgage rate.

These regulations were meant to slowly decrease prices as people were having trouble affording homes in “hot markets.” The regulations essentially caused the long-running seller’s market to slowly become more of a buyer’s market – or at least that’s where we thought things were headed.

Next came the changes in April.

On April 20th, 2017, the Ontario government introduced the Ontario’s Fair Housing Plan, 16 measures designed to further improve affordability. These were less welcome to say the least, and have already caused some major interference in the housing cycle.

On top of all this, Governor Stephen Poloz has lifted the benchmark overnight rate to 0.75 per cent from 0.5 per cent, which will only add more fear and confusion – and may slow things down further.

The rate increase itself is not the issue. It’s a combination of everything at once. There is simply too much going on and too many measures for buyers to digest, causing them to put off purchasing a home altogether. We have already seen an increase in the number of buyers walking away from their deposit.

Many buyers are also waiting too long before getting their purchase and sale /offer off to their lender or broker. This is not only harmful, but it will also cause a ripple effect if the transaction does not close. The longer a homeowner waits to get an approval, the greater chance the appraised value will not match the purchase price.

Basically, people are really struggling to understand the new rules, further perpetuating the confusion – …read more

Source:: The Huffington Post – Canada

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