We wanted to take some time to answer some of the questions we have been receiving lately. This post is aimed to keep you in the know and hopefully answer some of the questions you have been wondering yourself! Here are the top three questions within the past month:
1. What are the new mortgage lending policies and how are they going to impact me?
The Liberal Government announced new mortgage lending rules that aim to limit the amount many Canadians can borrow to help ensure that when interest rates rise, they’ll still be able to afford their payments.
As of October 17, 2016, new mortgage lending policies state that a stress test that had only applied to borrowers who opted for variable rate mortgages or fixed rate mortgages with terms less than five years will now be used for all home buyers with less than a 20% down payment.
The stress test measures whether the borrower could still afford to make payments if mortgage rates rose to the Bank of Canada’s posted five-year fixed mortgage rate of 4.64 percent – even though many lenders are currently offering mortgages at far less than that.
This new rule could potentially eliminate 20% to 25% of buyers, especially those who are first time home buyers with small down payments. Since it will be harder for buyers to get a mortgage, demand for housing will become limited, and could result in a potential price drop.
2. How do the CMCH red alerts affect Canada’s real estate market?
Areas such as Hamilton and Oshawa are feeling the side effects of the hot markets in Toronto. A red alert was issued by Canada’s housing agency about the country’s real estate sector as a whole. The “red” alert warning means that there is a strong risk of problems on the horizon. How did this red alert come about? It is due to overvaluation – meaning house prices remain higher than the level of personal disposable income, population growth and other fundamentals would support. As Toronto prices go sky high, home buyers look to the next affordable market, like Hamilton, and as a result prices go up there.
3. Where is Hamilton’s housing market heading?
There has been a lot of speculation about Hamilton’s housing market overheating over the past year, but conditions remain moderate to problematic. We are expecting an increase in housing this year as the average Hamilton price for a resale home could reach as high as $510,000. Although Hamilton has an active market, the issue lies within there being more buyers than sellers. Not to mention, people from the GTA are coming to Hamilton in search to find an affordable home, and as a result, pushing Hamilton’s housing prices up. There is also evidence that increases in income and population growth have not kept up with the rise in home prices over the last quarter. But not to panic, we should expect to see the market self-regulate itself by 2018. Measures like the new mortgage lending policies are already in effect to help promote stability in the market and prevent sharp corrections in house prices.
Be sure to check back for more Q&As and feel free to contact us if you have a question of your own that you would like to be answered.