Federal Minister of Finance, Bill Morneau, announced in October 2016 a series of measures to stabilize the real estate market. Here’s the breakdown.
Alexandre and his wife purchased their first property one minute to midnight, 48 hours before the new federal mortgage measures entered into force on October 17. “We were really happy to not have to deal with the new regulations,” admits Alexandre.
The couple are among other first-time buyers who don’t have a down payment worth 20% of the property purchase price. Under the new regulation, the couple would have had to undergo a crisis simulation test, not with their actual interest rate (3% fixed over 5 years), but rather with the Bank of Canada’s reference interest rate, which currently sits at around 4%.
Despite this, the couple probably would have qualified, admits Alexandre. However, not everyone is so fortunate. The Canada Mortgage and Housing Corporation (CMHC) estimates that between 5 and 10% of buyers will be affected by the new regulation over the next 12 months.
Here is a look at the new mortgage reality and the impact it will have on first-time buyers.
Direct impact and indirect impact
Some of the new measures have a direct impact on consumers, as it is the case with the new requirement to pass a crisis simulation test for higher loan-to-value ratio loans.
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