The prospect of purchasing a home may be less likely for many Canadians after Tuesday.
Beginning on June 1, the minimum qualifying rate will be the greater of the mortgage contract rate plus 2 per cent or 5.25 per cent.
The Office of the Superintendent of Financial Institutions announced the change that would affect uninsured mortgages on May 20.
On the same day, Deputy Prime Minister Chrystia Freeland announced that similar amendments would be made for insured mortgages.
“The recent and rapid rise in housing prices is squeezing middle-class Canadians across the entire country and raises concerns about the stability of the overall market,” said Freeland in a Government of Canada news release.
Canada’s mortgage stress test was implemented to help prevent a financial crisis. It assures that homebuyers purchasing their property during a period of low interest can still afford to pay their mortgage if interest rates rise.
The most recent adjustments however will prevent some Canadians from even dreaming of purchasing a home.
“When you have first-time buyers this has a bigger impact than someone who’s sitting on a house there coming out of or somebody coming from away,” said Ryan Davison, President of the Greater Moncton Realtors.
Davison believes that the changes will impact affordability by about 4%.
For a market like Moncton, where many people speculate properties are mostly being bought by individuals moving out of large markets, the mortgage changes will have little impact.
“Those people should not be impacted. A lot of them are coming here and downsizing from a house that might be north of a million dollars,” said Davison.
He notes that while he has heard talks of many buyers coming from out-of-province, he has yet to see statistics that can confirm that.
The qualifying rate is reviewed at least once a year.
