A message from me...
There is a lot in news lately about the government trying to control the runaway real estate
market, but perhaps this is the most significant change. A major shift in mortgage rules means that buyers taking on loans to buy homes may not qualify to borrow as much as they previously could.
The change means that all home buyers, regardless of how much they have for a down payment,
will be subject to a mortgage rate stress test beginning Oct. 17 that has, up until now, been reserved for those with less than 20 per cent down. Buyers with a down payment of between five and 20 per cent must be backed by mortgage insurance to protect the lender in the event the homeowner defaults on the loan. Because they are considered higher risk, those buyers must pass what’s called a mortgage rate stress test to qualify for insurance backed by the federal government through the Canada Mortgage and Housing Corp.
That stress test measures whether the buyer could still afford to make payments if mortgage rates rose to the Bank of Canada’s posted five-year fixed mortgage rate. That rate is usually significantly higher than what a buyer can negotiate with banks or other lenders. For instance, TD has a five-year fixed rate mortgage at 2.59 per cent, while the Bank of Canada’s rate is 4.64 per cent.
The stress test also sets a ceiling of no more than 39 per cent of household income being necessary to cover home-carrying costs such as mortgage payments, heat and taxes. Until now, buyers with more than a 20 per cent down payment have escaped such scrutiny. How this will impact on our local market is yet to be seen, but I would expect to see price increases moderate, while the lack of inventory and high demand should hold prices steady and we move into a more balanced market. Happy Thanksgiving and Happy Halloween!
If you wish to check out the release from the Victoria Real Estate Board please follow the link below:
This month's featured listing: Lot 5 Blackwood Heights, Lake Cowichan
This beautiful property is a five acre lakefront lot on heavily sought after Cowichan Lake! It is absolutely stunning, with nothing that compares. Very tranquil and peaceful setting bordered by parkland with 30 Meters of lake frontage! R-2 Zoning allows for secondary suites or a secondary dwelling! Further uses allow for B&B, agricultural and home occupation! PERC has been obtained, hydro has been established and many driveways in place! All you have to do is start building! Build your vacation home or set yourself up here for full time living with a variety of options presented! Call me today for all details. Oh, and PS...DOCK INCLUDED! This is the last lot left and it won't last!
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