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It’s more than just the year that changed on January 1st. As of the 1st of January, in this new year, there are changing mortgage rules and they’ve now been implemented. The big change in Canada’s mortgage rules is the addition of a ‘stress test’ as a mandatory part of new mortgage rules. The tests are designed to determine whether a borrower could still afford to make mortgage payments if Canada’s historically low interest rates were to rise. How might this help you?
As we noted, Canada’s interest rates are a lot lower than they could be, and one day they’ll rise. If you’ve got a 25-year mortgage then you can be absolutely certain that the interest rate environment will change a lot before you have paid off your mortgage, so the tests are valuable.
Housing prices in Toronto and Vancouver have grown beyond the point that they’re sustainable, with knock-on effects across the country (including here). Although local governments have managed to cool these red-hot markets (Toronto prices are down 20% since April) this federal-level action might just make buying a Coquitlam two-bedroom possible if you don’t have a seven-figure income.
The stress test means that you (probably) won’t be able to borrow as much as you could a year ago, but that might not be a bad thing, long-term. Ultimately, the changes limit your ability to get in more debt, meaning that the market can balance out more.
If you stick with your existing mortgage provider, you won’t need a stress test. That’s good news if you have a good rate right now, but it could mean that you can’t shop around for a better rate if you know that you won’t pass a stress test.
The bottom line is: don’t get discouraged! We’re here to help you navigate today’s mortgage market and get the home you want, so give us a call