“What to do about the new mortgage rules” via “Toronto Star”
Starting January 1 2018, home buyers faced a new challenge in addition to rising prices and a restricted supply of available homes — a mortgage stress test designed to cool the overheated housing markets.
The test, introduced by the Office of the Superintendent of Financial Institutions (OFSI), requires the qualifying rate for an uninsured mortgage to be the greater of the Bank of Canada’s five-year benchmark rate (currently sitting at 4.99 per cent) or the rate homebuyers negotiate with the bank plus two percentage points.
That means even a buyer who negotiates a mortgage at 3 per cent will have to show they can cope with payments rising to 5 per cent.
A report by Mortgage Professionals Canada estimates the new rules mean buyers will be able to afford to borrow 20 per cent less than under the previous rules.
The Star asked financial experts for advice on how best to handle the new regime:
Clear those debts..
Check the fine print..
Timing is key..