New mortgage rules could make a significant impact on the housing market in Greater Victoria, say realtors. Calvin To has more on how affordability could be affected.
New mortgage rules announced Tuesday could make a significant impact on the housing market in Greater Victoria, say realtors.
Starting January 1, 2o18, buyers with a down payment of 20 per cent of more will have to prove they can afford a mortgage at the average five-year posted rate, currently at 4.89 per cent, or two per cent above their actual mortgage rate, whichever is higher.
Previously, only insured borrowers had to pass an additional stress test.
Mortgage broker Ned Boniface says about a third of his clients will no longer qualify for the home they had planned to buy.
“If it costs you $800,000 or $900,000 to live in one part of town, and then all of sudden you can’t qualify for that, you’re now looking at a different area of town,” Boniface said. “And it affects obviously catchment areas for schools, where you’re working, how much your commute is.”
Tony Zarsadias, co-owner of The Condo Group, said the change will on average decrease buying power by 20 per cent.
The end result could mean more pressure on the rental market, as people put off purchases, according to Zarsadias. It could also add demand for lower priced properties, like condos.
“If renters… don’t move into the home ownership market, it’s just going to tighten things up more,” Zarsadias said. “And unfortunately, we’re probably going to see rental rates go up as well.”
The new stress test will not apply to renewals as long as borrowers stay with the same lender.