New guidelines for Canadian homeowners will now require all conventional mortgages to qualify for a five-year fixed rate or the contractual rate plus two per cent, whatever is greater.
The new rules were announced by the Office of the Superintendent of Financial Institutions (OSFI) and will take effect Jan. 1, 2018, though some lenders make put them into effect sooner.
Terri Hitchcock, a broker with The Mortgage Group, said those in the business weren’t surprised at the new rules, but disappointed. “It’s not terrible, but with these new guidelines, given that clients already have 20 per cent down – to me, it’s a bit overkill,” she said.
For anyone wanting to refinance their home, access to equity might have to consider a lower amount, while those looking to purchase with 20 per cent or more for a down payment, may need to adjust their expectations or consider longer loan arrangements with higher rates.
“We want to make sure people are buying houses that five or 10 years down the road, they can still afford,” Hitchcock explained.
Credit unions in B.C. are not affected by the new stipulation, nor is anyone who wishes to renew or buy real estate with less than 20 per cent down.
Since 2008, there have been five mortgage rule changes implemented by OSFI and the federal government; this newest amendment to the guidelines will be the sixth major change. Overall, Canadian housing prices are fairly stable and have continued to increase since 2006.
While the effect of the new rules remain to be seen, there is strong evidence the market in Victoria – traditionally a strong one – will withstand the changes.
However, Hitchcock wonders how that will play out for local buyers. “I’m very interested to see what’s going to happen in January,” she said. “I think we’re going to see people purchasing less especially in Victoria, where homes are more expensive. It’s not going to crash the market but it is going to impact a core group of buyers.”