Hey guys! Kris here, I hope you are all enjoying your holidays so far!
A good friend of mine, Jordan Lapier, just emailed a very good breakdown of the new Mortgage changes coming next Month. He gave me permission to share this with my client’s so I thought it would be a great blog post. Jordan is a highly respected/very talented lender working with BMO – I will share his contact info at the bottom of this post and if you have any questions do not hesitate to get in touch with him. He is always happy to break things down for people (myself included)
Here’s what to expect:
· Additional “stress test” requirements as laid out by regulators whereby applicants with 20% down payment or more will still have to qualify at a higher rate, much like high ratio is structured now.
· Needed to cool housing market and protect Canadians from over exposure to debt levels in a low interest rate environment.
· Could impact affordability for total borrowing by as much as 15% reduction in purchasing power.
· Stress test will be used to ensure new applicants will be able to afford future rate increases should they occur.
· Stress test rate is BoC rate of 4.99 or contract rate + 2%, whichever is greater.
· Stress test reduces overall purchasing power for clients as it will increase qualifying payments.
· Lenders do not apply the stress test for renewals, only when purchasing or refinancing for additional funds. This could limit client ability to shop the market when coming up for renewal.
· If a buyer has signed a purchase agreement prior to Jan 01, then they are not subject to the new qualifying rules.
· Mortgage commitments for refinances
· Nationally, approx. 10% of borrowers who were approved in 2016/2017 would not have qualified under new rules so impact, while significant, may not be as significant overall.