Earlier this month, the first wave of changes to Canada’s new mortgage rules officially took effect, and next month, the second wave of changes will be applied to select borrowers and lenders beginning on November 30th.
Now, if you’re like most homeowners or home buyers, you’re probably asking yourself what these changes mean to you. Consider this your everything you should know about the latest changes to Canada’s mortgage rules, and what you can expect beginning November 30th.
- For starters, the purpose of the new rules is to protect homeowners and those considering buying a home from any financial shortfall.
- The changes were also put in place to prevent a housing crisis from ever occurring (Remember the United States housing market crash of 2008?)
- As of October 17th, the Bank of Canada’s Mortgage Qualifying Rate (MQR) has been applied to all insured loans.
- Currently, the MQR is double what today’s typical five-year fixed-rate is.
- The MQR change will lower the maximum purchase price for most home buyers.
- This change affects high-ratio mortgages, whose down payments are 20% or less of the purchase price of a home.
- Starting on November 30th, low-ratio mortgages will be affected by the same changes that impacted high-ratio mortgages.
- Low-ratio borrowers’ rates will now be higher at renewal, and will no longer qualify for low mortgage insurance (or portfolio insurance).
- Industry analysts expect lender’s rates to increase.
- The changes lessen the chance of the Bank of Canada raising its policy rate in the near future.
- If you’re considering buying new construction properties, you may no longer qualify for certain financing opportunities.
Overall, the intent of the new mortgage rules is to lessen the risk of Canadians taking on any more mortgage debt. For markets like Toronto and Vancouver, the hope is that the changes will prevent prices from soaring out of reach from buyers.
If you have any questions about how the new mortgage rules affect you or the purchase of your next home, please don’t hesitate to call or text me at 647-898-4663.
For a more detailed explanation of the new changes, please visit our go-to mortgage expert David Larock’s blog, here.