I was talking to my buddy Broker/Owner at Big City Financial/ Mortgage Architects and asked him to simplify all the information people are getting with all these changes to mortgage rules. Seem's a lot of people don't understand. It was hard for me to understand when the rules came out as well. Us as Realtors® were not informed that all these changes were coming. Hope this helps a bit.
On October 17th 2016 the Department of Finance announced a new “stress test” rule change that is aimed at protecting the financial security of Canadians and supporting the long term stability of the housing market in Canada. What is the “stress test?” Simply put all insured mortgages must now qualify at the Bank of Canada rate (today is 4.64%). Prior to the rule change any term equal to or longer than a 5 year fixed could qualify at the mortgage contract rate (today 2.44%). This means that your mortgage payment will actually be calculated on the 2.44% but you will qualify as if it were 4.64% in hopes to mitigate the housing risk going forward. This change has had an impact on a few different areas. Immediately anyone seeking an insured mortgage has lost buying power (ie $100,000 household income on a 5 year fixed: before changes-mortgage amount 561,000, after new rule changes- 445,000) It will also have an effect on the fixed interest rates as some lenders try to recoup the extra cost that they may incur. We have seen a small increase in the fixed rates over the last week and will probably continue to see that trend upwards for the above reasons along with a few others.
Thanks Braden for the quick blog. His contact information is below if you have more questions. Contact either one of us anytime during business hours.