The Liberal Government has announced a major shift in mortgage rules aimed at ensuring Canadians aren’t taking on mortgages that they can’t afford. The changes are intended to address topics related to foreign buyers who are buying and flipping homes in Canada and to reduce the risk of Canada’s financial system from becoming unstable.
The new rules expands a mortgage stress test to all insured mortgages.
As of Oct. 17, a stress test used for approving high-ratio mortgages will be applied to all new insured mortgages – including those where the buyer has more than 20 per cent for a down payment.
These measures appear to be targeted in the Vancouver and Toronto real estate markets after concerns of sharp rises in the price of homes in these cities put the possibility of defaults at a greater risk should mortgage rates continue to rise.
Since the new rules appear to be aimed at lowering the government’s exposure to residential mortgages for properties worth over $1 million, Toronto Realtors like Elli Davis say the changes affect a relatively small amount of mortgages in Toronto. Consumers buying homes over $1 million have lots of equity to begin with. It can also be viewed as the government taking steps to balance and promote healthy market activity. In fact, statistics show that Toronto real estate soared 11% in October 2016 compared to last year despite the introduction of this new ruling. Toronto realtors may actually experience a more level playing field.