Mortgage stress test might stress-out Okanagan housing market
In just a few days, the new so-called ‘stress test’ on mortgages takes effect.
Come next Monday, the amount a home buyer can borrow will be measured on the five year fixed interests rates posted by the big banks. Right now, that’s just under five per cent.
For example: if you’re household income is $120,000 and you put down $80,000 as down payment — you qualify for a $588,000 mortgage at today’s lowest interest rate of 2.5 per cent. But under the stress test at a higher interest rate you would only qualify for mortgage of just under $500,000.
Some realtors predict the rule changes will have an impact on first time homebuyers.
“There might be some people who will have to wait, save up a bit more money or make more money at work in order to qualify. It’s going to slow down those people who were able to get into a very hot market,” said Jamie Blair of REMAX Kelowna.
The Okanagan Mainline Real Estate Board said the rule changes could slow down the Okanagan’s hot housing market.
“Talking to some of my mortgage professionals it’s going to potentially have a significant impact on the market moving forward,” said President of the Okanagan Mainline Real Estate Board, Anthony Bastiaanseen. “We’re already dealing with a situation where affordability is a key challenge and this is going to make it even tougher. A good percentage of the market are people that are getting insured mortgages and this is changing the rules for a good percentage of them,” he said.
Those who could be in for the biggest shock are buyers who have signed a contract with a developer like Mark West of Epic Real Estate in Kelowna. He said those buyers will have to come up with more money or risk losing their deposits.
“If the stress test puts them in a position where their income levels don’t support the loan amount, then they will have to come up either a greater income level or more of a down payment,” he said.
The new stress test kicks in nationwide Oct. 17.
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