Changes to mortgage stress test unlikely to change local market conditions: Realtors
Changes to Canada’s mortgage stress test isn’t expected to have much impact on Kamloops and Okanagan real estate markets.
Penticton mortgage broker Campbell Watt says the changes, in simplest terms, amount to around a 4 per cent drop in purchasing power, using the example of a potential buyer with an $80,000 income.
The changes apply to uninsured mortgages involving buyers who can put down at least 20 per cent of the purchase price.
Typically, Watt tells his clients how much they can borrow, then they add whatever they have for a down payment and that’s the amount they can purchase for.
“In general terms, a family with an $80,000 income with a 20 per cent down payment, looking at a 25 year amortization and no external debt, could afford to buy a property valued at $480,000. They are eligible to borrow $384,000. The changes that took effect yesterday means they can look at purchasing a $460,000 house, and are eligible to borrow $368,000,” Watt says, which is roughly a 4 per cent decrease in buying power.
He says the above example is as simplified as possible, noting “every mortgage has so many moving parts to it."
Watt says the changes are a reflection of the federal government’s intention to try and take some heat off the presently overheated housing market as well as protect consumers should interest rates rise.
“I don’t think this alone will make the difference, but it might be a start. I think rates are going to go up in the next 12 to 18 months, as we’re seeing inflation at more than 2 per cent, which is the target, but not all lenders use the stress test so there will still be ways to mitigate it. I don’t think it will have much impact on sales," Watt says.
Penticton Royal LePage realtor Dori Lionello says she believes the changes will have a minimal impact on Okanagan real estate.
"I think it gets media hype but if you’re a qualified purchaser working with an experienced mortgage broker, it won’t impact you significantly. You’ll still be in the purchasing bracket, so I don’t think it will have an effect on prices,” she says.
In Kelowna, Century 21 realtor Trevor Florko says the changes will make it more difficult for first time buyers, who are already in a difficult position.
“It’s not likely to have a significant impact other than to make it tougher for first time buyers who already can’t find a reasonably priced home. It’s a double-edged sword in that we want to ensure people can afford their mortgage payments should inflation cause interest rates to rise, but there is nothing out there that is affordable now. This just makes a bad situation worse,” Florko says.
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