The far-reaching changes to federal mortgage rules that took effect last month will have the most noticeable impact on first-time buyers, as this sector will now have to shell out larger amounts to purchase their homes.
The latest study by the mortgage portal Ratehub revealed that the just-introduced qualification revisions will lead to insured mortgages on homes at the average benchmark price ($474,000) being at least 20 per cent more expensive, HuffPost Business Canada
The study noted that in Vancouver alone, first-time buyers will need around 27 per cent more income (an extra $33,000) to afford an average home, while those in Toronto will have to earn almost 25 per cent more (an extra $29,000).
Coupled with the fact that a majority of the population cannot realistically expect pay raises of 20 per cent or more in the next few months, experts warned that the new rules will lead to a significant decline in sales transactions nationwide.
In a recent analysis, Dustan Woodhouse
of Dominion Lending Centres
stated that homes in the average price bracket were well within reach of the middle classes prior to the new rules.
“It is worth noting that previous to Oct 17, 2016 the income required for this same purchase price was ~$88,000.00 per year. In other words an experienced police officer, teacher, nurse, or firefighter could pretty much pull that [purchase] off on their own income.”
Instead, what the regulatory revisions succeeded in doing was penalizing would-be buyers who have stable verified income streams, exemplary credit scores, and no consumer debt loads, Woodhouse said.
“They [will need to] get themselves a [major] raise before they buy what they could have bought. Exactly what so many before them have bought, and what just ~0.30% of CDN’s ever stop making payments on.”
Value of Vancouver homes might decline by as much as 20% - report
Mortgage rate increases in large banks are just the beginning