01/02/2018
With 2018 upon us, it is important to remember that the new mortgage stress test was introduced on January 1, 2018. Here are some details...
WHO does it apply to? Stress tests have existed for a year, but typically only applied to buyers who put down a down payment of less than 20%, an obtained an insured mortgage. With these new rules, the stress test will now be applied to uninsured buyers who pay a down payment of 20% or more. The stress test only applies to mortgages from federally regulated institutions (not to credit unions whi might elect to adopt such requirements and not to private lenders).
WHAT is this new Stress Test? The new stress test will require that buyers prove that they can still afford their mortgage payments if interest rates were raised by TWO percent.
WHEN will this happen? These new mortgage rules became effective on January 1, 2018.
WHERE will this happen? This new rule hasb been implemented across Canada, but will most deeply affect the housing markets in Toronto and Vancouver.
WHY is this important? The thinking is that these new regulations will insulate the country's economy from economic shocks like recession and depression. HOWEVER, this new stress test will make it more difficult for buyers, particularly first time home buyers to qualifiy for mortgages, thus decreasing purchasing power. The Toronto Real Estate Board is warning that this could dampen Toronto's already volatile housing market. In addition, critics are warning that this may encourage buyers to seek out riskier loan arrangements from non-regulated lenders like credit unions and private lenders, private lenders being more costly lenders.
In conclusion, there are pros and cons to this new mortgage stress test. My fellow colleagues in the real estate industry should pay close attention to they way these rules will affect Toronto's housing market. If you have further questions or concerns, please do not hesitate to call me at 416-520-6120.
Sincerely yours,
Steve Shub.
