New mortgage rules announced Tuesday by Federal Finance Minister Jim Flaherty shouldn’t have a big impact on the local housing market, say several people who make their living in the industry.
The changes, which take effect April 19, will require borrowers seeking a government-insured mortgage to qualify for a five-year fixed-rate loan — which has more stringent debt-servicing requirements than lower-rate mortgages. Many buyers of rental properties will have to make a down payment of 20 per cent, up from five per cent, to obtain a government-backed mortgage; and home owners who refinance their mortgages will be limited to 90 per cent of the property’s value, down from 95 per cent.
“I don’t think the sky is falling,” said Leann Riguidel, a Red Deer mortgage broker and president of Universal Mortgage Solutions. “I think these changes were prudent for them to put into place.”
Sandi Gouchie, president of the Central Alberta Realtors Association and a Realtor with Royal LePage Lifestyles Realty in Lacombe, agreed.
“As a Realtor, I didn’t really see it as being necessarily a negative thing.”
“It’s a lot better than we anticipated,” added Jean-Guy Turcotte, a mortgage professional with Regional Mortgage Corporation in Red Deer and a director with the Canadian Home Builders’ Association — Central Alberta. “It’s not affecting the average Canadian who is buying a home.”
Some buyers, particularly those entering the market for the first time, may have to lower their expectations, said Gouchie. In some cases, they may not be able to find a home in their price range at this time.
“That’s going to squeeze a few people out of the market, but not that many,” said Riguidel.
The new restrictions on investors in rental properties should help keep the price of those homes down and increase their availability for others, suggested Gouchie.
“It will cool a bit of the speculation,” said Riguidel, adding that this will help first-time home buyers.
Turcotte would have preferred to see the government tighten up the credit requirements for real estate investors rather than forcing them to increase their down payment on rental properties.
However, he thinks requiring home buyers to qualify for a five-year fixed-rate mortgage is positive. Anyone who can’t, should be thinking twice about buying a house anyway, he said.
Turcotte also doesn’t have a problem with the new equity requirements for those seeking to refinance their homes.
“It deters people from racking up their debt and using their house as a proverbial ATM machine.”
Riguidel doesn’t think this 90 per cent requirement will have a huge impact on most people anyway.
“Instead of consolidating all of your debt, maybe you won’t be able to add in your car payment,” she said.
Sales activity in the housing market could pick up prior to April 19 as buyers rush to beat the implementation of the new rules, said Gouchie.
“Anybody that may have been sitting on the fence, hearing that may just give them a little bit of a jump start.”
Turcotte pointed out that buyers may be able to get pre-approved for mortgages before the rules take effect, even though their deals don’t close until after.
Riguidel, Gouchie and Turcotte all think current low interest rates make the market very attractive, although the cost of borrowing is expected to rise later this year. The federal announcement shouldn’t alter the situation significantly, they said.
“They certainly aren’t changes that are going to stop our housing market,” said Riguidel.