Starting in the new year those individuals applying for uninsured mortgages will face tougher rules when it comes to qualifying for a mortgage.
THE NEW MORTGAGE STRESS TEST
As of January 1st, 2018 the Canadian Mortgage and Housing Corporation has released a new stress test that home buyers will need to qualify for before receiving an approval. Currently those buyers with down payments of 20% or more do not require mortgage insurance through CMHC. According to the Financial Post, This market will now need to
“Qualify based on either the Bank of Canada posted rate for the five-year fixed rate product or two percentage points above their contracted mortgage rate, whichever is higher.”
Currently uninsured buyers can qualify for an interest rate starting at 2.97%, but with the new changes will require to qualify for a 5% interest rate.
WHY IS CMHC MAKING THESE CHANGES?
The plan is that they are looking to protect Canadian homeowners, especially stating the vulnerability in Toronto, Hamilton, Vancouver, Victoria and Saskatoon. Typically vulnerability occurs when there is an overheating in the market causing houses to be overpriced and overvalued. This effect can hurt homeowners financially, should there be a dip in the market. This also ensures that individuals can afford their home, should the interest rate rise.
OUTLOOK ON THE CURRENT MARKET
As buyers and sellers rush to see their approval before the deadline of Jan 1, 2018 many predict a busy season ahead in the Edmonton area on both the buying and selling end. This could be one of the busiest Christmas months the market has seen in a few years.