From the blog...


Posted on: October 11th, 2016 by Chris Scott

The Federal Government is taking steps to ease emerging risks in the country’s housing market. The new measures should slow the injection of foreign cash and will tighten the eligibility rules for prospective borrowers. The sizzling Toronto and Vancouver markets are out of reach for many Canadians and some fear that foreign investment money in these markets has helped drive up prices. There is also growing concern that Canadians have too much debt.

Beginning on October 17, 2016, all insured mortgages will have to undergo a stress test to determine whether a borrower could still manage to make his/her mortgage payments if the rates went up or their income went down. Currently the test will be to ensure all insured borrowers can qualify based on the posted rate for a 5-year rate mortgage (now 4.64%).

On November 30, 2016, several eligibility rules will tighten on mortgages where borrowers made down payments of at least 20% of the purchase price.

The Government plans to tighten a loophole on an exemption that allows homeowners to avoid paying capital gains on tax on the sale of a principal residence such that this exemption will only be available, going forward, for Canadian residents and families will only be allowed to designate one home as their primary residence.

Other key measures that will affect all insured mortgages is a maximum amortization of 25 years, a maximum purchase price below $1 million, only owner-occupied properties being eligible and a total debt service ratio of 44% at the time a loan is approved.

Experts believe these measures will serve as a “tap on the brake” that could lead to a “slight, additional slowing of a market that is already slowing”.

New consumers unable to meet these requirements could be shut out of the market and even consumers with existing mortgages might be unable to easily switch lenders. It remains to be seen whether the changes will have a cooling effect on hot housing markets or how much more difficult it will be for would-be homeowners to secure mortgages.

If you have any questions about this – or anything else related to real estate, please give me a call.


Leave a Reply