More challenges facing potential home buyers - Best Mortgage Broker Rates

More challenges facing potential home buyers

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Late last year, a new stress test was implemented on all high ratio mortgages, that is, mortgages obtained from a purchase with less than 20% down payment. This means that regardless of the actual rate on the mortgage, home buyers would have to qualify based on a much higher rate, known as the benchmark rate, currently at 4.84%.

It is widely anticipated that further regulation will be announced which would implement the stress test on ALL mortgages, regardless of down payment.

This will significantly impede the ability to qualify to buy at today’s prices for many homebuyers.

For example, a couple earning a combined income of $120,000 per year would qualify for a mortgage of ‘roughly’ $680,000. Under the stress test, this amount would be reduced to only $540,000. A whopping $140,000 difference.

The new mortgage regulations that that were announced late last year did very little, if anything at all to cool off the housing market. The recent cooling we have seen has nothing to do with the new mortgage regulations, and more to do with consumer sentiment, despite what we hear from government officials. These new changes will however have a significant impact, if they are in fact implemented.

Would this be enough to crash our housing market? In itself, I would say no. However, if mortgage rates continue to rise as they have been, then the combination would almost certainly lead to a market correction.

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Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank – How to Win The Mortgage Game in Canada, and has ranked as one of the top 75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage Broker of the Year in 2018 - 2021, 2023, and can be seen as the exclusive mortgage broker on season 2, 5-7 of TV’s Top Million Dollar Agent.(Global, Slice TV and Rogers)