SIMPLIFYING THE NEW MORTGAGE RULES

I'm hearing lots of different information on the next set of mortgage rules set to be in place January 1 2018. Two things that need to be clear, one is that the last set of rules did change the number of first time buyers and lower the amount they qualified for by about 20%. All of the insured buyers, those with less than 20% down payment have to qualify at 4.99% for their mortgage. They still end up paying the mortgage payment based on the discounted rate and this morning that rate is 2.89% from several of our lenders. The bond markets took a .20% dip this week because the government didn't raise the bank of Canada rate which of course lowers the fixed rate mortgages.

The new rules will affect the buyer who has 20% or more down payment, they previously could qualify at the discounted rates but now must qualify at at least the 4.99% the same as the insured buyers above. They will still pay the mortgage based on the discounted rate just as they do now. This change is projected to have the same effect on this consumer as it did on the insured buyer and reduce their buying power by 20% as well. This will also affect the refinance markets as they will now need to qualify at the 4.99% rate.

The biggest issue maybe that people will not be able to move up, as in sell their starter home and buy something larger because they will not qualify. So if you think your mid range markets, 400k to 500k, were hot to begin with then watch what happens in 2018 as more people no longer qualify for the 600k and 700K homes.

People will still buy but they will be forced to buy less home.