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The Geen + Byrne Real Estate Team
By Erica Alini | National Online Journalist | Money/Consumer Global News
The new mortgage stress test coming into effect on Jan. 1, 2018 could make 10 per cent of prospective homebuyers with larger down payments ineligible for a loan from a federally regulated lender, a new analysis from the Bank of Canada suggests.
The numbers are based on the proportion of low-ratio mortgages issued between mid-2016 and mid-2017 that would have been disqualified if the new mortgage rules had already been in force. The tighter qualifying standard would have cut off 10 per cent of borrowers with a down payment of 20 per cent or more, equivalent to $15 billion worth of mortgages.
Some $10 billion of that was tied to mortgages in Toronto and Vancouver, suggesting those two cities will likely see the biggest impact from the new restrictions.
Still, the Bank carefully noted it’s uncertain how borrowers and lenders will actually react to the upcoming measures.
The stress test will affect homebuyers applying for mortgages that are smaller than 80 per cent of the value of the property they are seeking to purchase. As of next year, these borrowers will have to qualify for rates that are higher than the contractual mortgage rate they would be eligible for.
The rules, which are meant to ensure mortgage holders can cope with rising interest rates, are similar to those already in effect for borrowers with down payments smaller than 20 per cent.