Page 26 - Best Magazine Winter 2017

ECONOMY AND FINANCE
One minute
lending
market
update: Stress Test!
Up to Dec 31, 2017
After Jan 1, 2018
Target Rate
3.39%
3.39%
Qualifying Rate
3.39%
5.39%
Maximum Mortgage Amount
$400,000
$325,000
Available Down Payment
$100,000
$100,000
Home Purchase Price
$ 500,000
$425,000
26
THE BEST MAGAZINE WINTER 2017 - 2018
Recently, we have been bombarded with news regarding the regulatory changes announced by The Office
of Superintendent of Financial Institutions (OSFI). It is coming out with some new mortgage rules starting on January 1st. 2018. The provincial government from Ontario also came out with some new policies with respect of housing this year; do we need more measures in place? We need to stop this from piling on, it seems like every level of government wants to save us from ourselves.
Back in April , we had a significantly increase in housing pricing in the horse shoe and Great Toronto Area. Governments were tempted to intervene, and since then we had the Ontario Province with the fair housing plan and new taxes, The City of Toronto increased the land transfer tax, mortgage rates have gone up and recently, new tougher rules to get mortgage for careful savers ( more than 20%
down payment) That really
has a risk of depressing the market and hurting the broader economy!
Why are the governments making all these changes? The increase of house hold debts, interest rate are on the rise and property values are also on the rise, therefore governments have been prudent. They have been careful and do not want to lead us into a house market meltdown; however, it is a pretty heavy hand. When the government is being heavy handed the problem is, they risk tipping the balance and making things worse.
Now with this new stress test starting on January 1,2018 people who want to move up are limited. The alternative in the other hand is to go into a secondary markets and borrow a higher rate. That indicates less money goes into the home and more money goes into the lenders. At the end of the day, it can price people out of market. Expect the average Canadian's home purchasing power for a given income to be reduced 15-20%.
Here’s an example of the impact of the new qualifying rate will have on the maximum mortgage proceeds and home purchase price/ refinancing. Amounts are based upon a combined Canadian family income of $75,000, 5-year fixed term mortgage at a contractual rate of 3.39%, 25-year amortization, $100,000 available for down payment and $700 in other monthly debt obligations:
Maximum mortgage amount will be influenced by other factors including product and term selected, amortization period, other debt obligations, and credit score.
The best approach the government could take is adding housing supply!. That gives us more choices and greater variety in the market place and will insure home ownership stays affordable, and no heavy handed on the home market. Also, it will intensify infrastructure, rail lines, subways and go transit to commute to work every day.
In conclusion, before you take action to buy and/or sell a house please for your benefit contact your mortgage company. They will then advise you what is best for your next move in the future.
Nestor Paez
Source:
Dominion lending Centres, Financial Post.
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