Canada's top banking regulator has published the final version of its new mortgage rules that go into effect Jan 1st 2018. These rules include a requirement to "stress test" all mortgage borrowers to ensure they could withstand higher interest rates.

Previously, only insured borrowers had to undergo such a test. Now, it doesn’t matter how large a down payment a borrower has, whether it’s an upsize, downsize or even a renewal at a different lender. Everyone must qualify at the greater of the five-year benchmark rate (4.89% today) published by the Bank of Canada or an interest rate 2% higher than the offered mortgage rate.

This will certainly have an impact on many buyers, especially in Victoria’s higher priced market. Likely we will see a slight softening in the Victoria real estate market, in the new year, due to these changes.

Veronica and I were able to attend an exclusive seminar on the day of the changes and found out that the new rules could affect someone’s ability to borrow by approximately 15-20%! E.g. a buyer of a $1 million home with 20% down, having to qualify at a 5.39% interest rate, rather than a typical 5 year fixed rate of 3.39%, could see their purchasing power reduced to about $825,000. 

If you are considering a purchase in the next year, please go and see your bank or mortgage broker right away to see whether waiting till 2018 could affect your plans. Let us know if you need a good broker. Meanwhile we are standing by to help if you decide, as many people likely will, that the end of 2017 is the time to buy.