How will the new mortgage stress test rules impact Metro Vancouver real estate?

The Office of the Superintendent of Financial Institutions (OFSI) and the Minister of Finance, Canada’s banking regulators, tightened the rules around the mortgage stress test on June 1.

Under the new requirements, all mortgage applicants must be able to afford their mortgage at an interest rate of 5.25 per cent or two per cent over the contract rate, whichever is higher, regardless of their down payment.

How will the new stress test impact home buyers?

Regulators introduced the stress test for insured mortgages in 2016 and for uninsured mortgages in 2018. This original stress test required borrowers to qualify at the greater of the benchmark posted rate for a five-year term or 200 basis points over the contract rate. This change reduced home buyers’ purchasing power by approximately 20 per cent and was a key factor behind the decline in housing market activity in 2018 and 2019.

This most recent adjustment to the stress test is anticipated to decrease the amount home buyers’ can borrow by approximately four per cent.

“While we saw a large impact on home buyers the last time the stress test rate increased, the magnitude of these changes is quite different,” said Keith Stewart, REBGV Economist. “A four per cent reduction in a home buyer’s maximum budget is unlikely to move too many people in or out of the market, or change the type or location of home they choose to buy.”

The new rules will dampen mortgage credit growth, but should have a modest effect on home sales and prices in the region going forward, according to Stewart.

If you’re looking to get into the housing market today, it’s critical that you work with your REALTOR® and mortgage specialist to carefully review your financial situation and ensure that you’re always making responsible, long-term borrowing decisions. 

(REBGV Newsletter)

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Michael Geller, a contributor to the Vancouver Courier re: real estate/housing issues, always has a clear and calm view of the situation.

Six False Creek affordable housing lots still empty after three decades: Vancouver Sun front page story March 10, 2018

While I didn't write this story, I feel partially responsible for it.
     During the recent debate about the forthcoming North-east False Creek development, much was made of the city's promise to include significant affordable housing. This prompted me to comment that this was a noble goal, but before getting too excited about these units, what about the 6 empty social housing parcels lying fallow along the North Shore of False Creek?
     I knew about these parcels because I was given a tour of them by Concord Pacific during the 2008 municipal election. Furthermore, I was involved as an expert witness in a lawsuit over them a few years ago. Following my comments, Lori Cuthbert contacted me. I happily put her in touch with Cameron Gray, who was the City's Housing Director, and while not directly involved in the acquisition of these sites, knew why they remained undeveloped.
     I told Lori that I thought it was outrageous that these sites remained undeveloped, not as a criticism of Concord Pacific, but rather of the city, province and feds who could have come up with a strategy to see these parcels developed with affordable housing, even in the absence of deep government subsidies. Enough said.
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