New Mortgage Rules

Starting January 2018, many homebuyers are facing much stiffer guidelines when it comes to getting a mortgage. The Office of the Superintendent of Financial Institutions Canada (OSFI) announced on October 17th, that all borrowers will be required to qualify for a mortgage that has a two percentage point higher rate than they are actually applying for. This new rule even includes borrowers who have down payments of 20 percent or higher and do not require mortgage insurance.

The changes were proposed to curb the buying ability of individuals who are already suffering from a high degree of indebtedness. During the last few years, the soaring house prices in Canada have forced many households to live in a state of virtual indebtedness. One small unforeseen financial calamity and indebt families won’t be able to pay their mortgage payments which will cause many to default. This cycle ultimately creates instability and the potential for a devastating crash. The new guidelines are being put in place to prevent people from overextending themselves and perhaps purchasing a home that they will be unable to afford down the road.

Currently, uninsured mortgages account for 45 percent of all home loans so these changes have the potential to have a dramatic impact on the housing market, especially in regions where home prices are already high. In such areas, people are already on the cusp of their buying potential when they find a home so the effects of these new financial changes may prevent many from being able to purchase a home.

Many people in the Squamish area wonder what impact the new financial changes will have on their region. To date, the Squamish housing market is red hot and a true seller’s dream but, ultimately, these changes may mean a decrease in the home sales in 2018. Many potential homebuyers will no longer be able to qualify for a mortgage at the amount they require to purchase a home in the region. Some would-be buyers may not even be able to buy a house.

In a high sale price area like Squamish, many buyers already barely qualify to purchase a home so with dramatic changes many will be unable to attain their dream of homeownership unless home prices come down or they experience an increase in their wages. This means that many who live in the area will be forced to look for long-term rental housing which is very difficult to find. The worse case scenario for Squamish is that people who work in the area may be forced to live further afield and commute because ultimately they will be able to afford to buy a home.

Many homebuyers hope that with a limited supply of qualified buyers then the availability of homes for sale in Squamish might increase but others fear that the housing boom may come to a screeching halt. Homes may sit on the market longer as sellers are forced to wait for qualified buyers.

Ultimately, would be buyers in Squamish are hopIng that the prices will start to drop to more affordable levels if the homes do not continue to sell rapidly. Perhaps a swing might occur and it may become a buyer’s market as opposed to a seller’s market.

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