Trick or Treat! Recently the Federal government may have played a trick on Canadians and announced a new mortgage qualification standard to be implemented on Jan 1, 2018. Earlier this year, rules were changed which impacted those Buyers who had less than 20% down payment. Now, even tougher standards will be imposed on consumers with more than 20% down. These further new rules will create a Buyer "purchase price ceiling" as much as -25% lower than before! This change could be signifigant!
This will obviously impact new Buyers moving into our Vancouver Real Estate market for the first time. However, it will also have a significant influence on current home owners. If you wish to buy the next "bigger/better" home, any "new morgage money" must now qualify at a rate equal 2% points higher than the agreed-to contract rate for the new money. For example, if you choose a five year rate at 3.19%, you will have to qualify at 5.19%. You may be able to take the required additional financing by way of a second mortgage, or a secured line of credit, however, if you choose to "blend" your existing mortgage with the new money, the entire total of the mortgage will have to qualify at the 5.19%.
We will monitor the outcome of this change after Jan 1, but it would seem logical that in the future it may be tougher for Sellers to get the prices they want simply because the Buyers will not be able to qualify for as much financing, even if they were so inclined to do so. Stay tuned!