As of January 1st 2018 the Bank of Canada had passed a rule that would be called the B20 regulations. This was an answer to the hot market and the fast increasing prices of the house market. The idea was that you’d have to pass a test that would qualify you at 200 basis points higher, which equals 2% above the contract rate or at a qualifying rate of 5.34% (the higher of the two). This allows the Bank of Canada to see how the market would react if they were to increase rates in the near future without causing a recession.
Once that was done, Bank of Canada started increasing rates every quarter by .25%. Thus resulting in the slow down of the housing economy. The B20 regulations did not only add the stress test but it did create stricter rules for international buyers. Adding a 15% foreign buyer tax helped in differing international investors. The use of these two new major rules helped slow down the housing market.
Now a year and half later, we have a market that is at the slowest. Both Vancouver and GTA have been hit hard with the stress test that everyone is now questioning if there should be a stress test. Recently the budget was announced and Bank of Canada had come up with a few new rules; Increasing RRSP’s from $25,000 to $35,000 for down payment and as of November CHMC will be putting 5-10% down for first time home-buyers/divorcees, with the clients own resources of 5% down to the max mortgage amount of $420,000.
Now lets take a look at today’s market; Bank of Canada has still kept the B20 regulations but the banks have started decreasing there rates from 1-5 year fixed and 5 year variables. This all comes from the slow down of the market and a way for the lenders to push the housing market in a positive direction. So as you being the end user you still have to pass the stress but if you are able to qualify lenders will fight for your business which in the end results in you having the best rate and bang for your buck.
In these pass few months I have seen the banks give exceptions on rules that without clients would not be able to pass the stress test or qualify for a mortgage. But because of today’s market, banks have become more lenient to Mortgage Agent’s that have a good reputation with them. Our good relationship with lenders result in the client getting a better rate and if they require certain exceptions, lenders are more willing to give us those exceptions.
If you have any questions about your mortgages or you know a friend who has a question, please don’t be hesitant and give me a call.
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Abishak (Abhi) Sharma