EDMONTON – There is good and bad news for Edmontonians looking to purchase a new home once new mortgage rules take effect on Monday.
First the bad news. You’ll need to fork over more money if you plan to purchase a pricier home.
Here’s how the new rules will work: if you’re buying a home worth over half-a-million dollars, you’ll need the standard five per cent down on the amount up to $500,000 but as of Monday, you’ll need 10 per cent down on the amount over and above that.
Now here is the good news. Local realtor Clint Kilkenny doesn’t believe the changes will greatly impact Edmontonians looking to purchase a home.
“It’s probably not going to affect the Edmonton market too heavily,” he said. “Our average sale price in Edmonton is (in) about (the) $420,000 to $430,000 range, where some markets like Vancouver, Toronto are all north of the $500,000 range – even Calgary is going to be a market that’s a lot more affected than we are.”
The new requirements may, however, price a larger percentage of first-time buyers out of the market. The changes will also motivate more to seek additional sources to borrow money from.
“Borrowers have increasingly been relying on less regulated non-banks and private lenders, or so-called shadow banking,” Derek Burleton, deputy chief economist at TD Bank said. “Further regulation may only push first-time homebuyer activity to these lenders.”
But homeowners who are “moving up” to a bigger or more expensive property, likely won’t feel the hit of the rule changes, experts say. That’s because they can leverage the proceeds from the sale of their existing home which will more than likely provide a more than sufficient down payment on the next property.
“I think the people that are searching in that range – $500,000 and up – maybe its going to make them step back from spending beyond that. We might find houses that are selling closer to that $500,000 range,” Kilkenny added.
Edmontonian DJ Cummer is looking to buy his first home. “The reason I want to buy is because interest rates are so low,” he said.
Cummer doesn’t believe the changes will affect him but says he thinks many home buyers looking at a pricier home may think twice.
“If you find something that’s a little more expensive and you have to make that pinch then maybe you’re going to think twice.”
“Always be mindful that interest rates might go up so when you’re spending and you’re looking at your budget, make sure you’re spending in your means in case there is that change,” Kilkenny said.
The new rules are the federal government’s first move to cool the housing market since 2012, and are specifically aimed at levelling off sharp price jumps in two centres: Vancouver and Toronto.
With files from Jamie Sturgeon
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