The Canadian Government and the Bank of Canada has done a great job at keeping Canada’s housing market stable and intact, even when our friends to the south suffered their major mortgage meltdown back in 2008. When these governing bodies adjust interest rates or put new rules or laws into place, they are looking to help Canada’s economy and population in the long run. Do these rules and regulation changes usually work? For the most part, yes, they keep our country trending in the right direction, steering away from “bursts and bubbles”.
Why Make Changes to Rules and Regulations?
It is no secret that the value of Canadian homes has been soaring over the past ten years. This can be a very positive sign when the value of homes increases at the same rate as a few other variables, such as household disposable income or GDP (gross domestic product). But, if the price of homes increases too fast, a “bubble” could form, which could then “burst” causing turmoil in the housing market and the country’s economy overall.
So do we have a bubble and is it in danger of bursting? We are not on the edge of disaster, however, it is clear that the Federal Bank and Government want to ensure house prices stay at levels that allows the majority of Canadians to still afford to purchase new homes, keeping real estate supply and demand in check.
What is the New Mortgage Rule that is Coming January 1st?
The Office of the Superintendent of Financial Institutions Canada (OSFI), announced on October 17th that all borrowers, even those who have down payments of 20% or higher and do not require mortgage insurance, will need to qualify for mortgages that are two percentage points higher than the rates at which they are applying.
How Will This Rule Impact Kelowna?
It can be difficult to forecast exactly how a market will react to a new law or rule- even Warren Buffet guesses incorrectly at times. Here at John Antle, we expect the housing market to be quite busy up until the New Year, as Canadians try and complete their housing transactions before the new rule comes into effect. If you have been trying to decide if this is the right time to buy or sell, this change in mortgage regulations could be a good signal that the time is right now.
What if I Want to Buy in 2018?
Again, it is difficult to say for certain what the market will look like in the New Year but if you are interesting in buying a home in a few months time, you might enjoy a reduction in housing prices overall as demand decreases while supply levels remain the same. When new rules and regulations come into effect, you want to partner with a team that knows the in’s and out’s of the system. For example, did you know that there are non-federally regulated mortgage lenders that will not be subject to the new OSFI rule?
Get in contact with our team and we will show you how we can utilize caisses populaires and relationships with credit unions to get you approved for a mortgage that saves you thousands of dollars in the long run.