Hundreds of people in Calgary who thought they’d already qualified for a mortgage may have to rethink their plans.
Natalie Callander and her husband want to start a family and need to move into a bigger house.
They had been pre-approved for a new mortgage but new rules to qualify for insured mortgages have changed their plans.
“With these new rules we might not be able to buy the house that we currently want because we have to qualify for a higher rate,” Callander said.
Normally, home buyers only need to qualify based on the interest rate for the term of the mortgages they are applying for. As of Oct. 17, anyone applying for an insured mortgage must pass a “stress test” to prove they can make payments if rates increase to 4.64 per cent – the current rate for posted five-year mortgages.
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Mortgage brokers say it means fewer financing options for home buyers and may delay home sales.
“The average Canadian buying a $500,000 house still can put five per cent down but they have to qualify at a higher rate,” Chris Cabel with Heritage Lending explained.
“Now we have to look at extending the time that it takes them to qualify. Maybe they have to get more income or get a co-signer or save more of a down payment to get those thresholds under the stress test.”
Natalie and her husband are both self-employed business owners and she says meeting the new standards is more complicated.
“Now we’re going to have to reassess the house that we want or we might just have to wait a little longer.”
Again, this is only for insured mortgages, but brokers say it will hurt lenders who can’t compete with the banks.
The stress test already exists for people with small down payments or who take out fixed rate mortgages under five years.
Anyone who already has a mortgage or who has already applied for mortgage insurance, isn’t affected by the new rules.