Impact of new mortgage rules uncertain

Impact of new mortgage rules uncertain

More rigorous stress test introduced for new mortgages at beginning of year

Alberta’s big city realtor associations are predicting new mortgage rules could shave up to 1.5 per cent off average house prices.

In Central Alberta’s smaller market, a similar forecast has not been made but realtors are watching closely.

“It’s hard to tell what will happen here in Central Alberta,” said Danielle Davies, outgoing president of the Central Alberta Realtors Association, which represents more than 500 area realtors. “The actual rules only came into effect on January.”

Under the new rules, even home buyers who don’t require mortgage insurance because they have a 20 per cent down payment, will have to prove they can afford their mortgage if interest rates rise above Bank of Canada’s five-year benchmark rate or two per cent or more higher than their existing mortgage rate, whichever is higher.

For instance, if a homeowner lines up a three per cent mortgage they must be able to prove they can afford five per cent not matter how much their down payment.

It’s called a stress test and the federal government has made it more rigorous out of concern for rising debt levels among Canadians. A similar tweak was made in January 2016.

Central Alberta Realtors Association and its provincial counterparts have raised concerns that the stress test changes could cool Alberta’s housing market just as it recovers from a lengthy downturn.

“The second set of (stress test) rules hit a little bit harder because we’re already trying to recover,” Davies said.

“I think it’s just one more thing to add to the pot to put on people’s minds as they’re moving forward into the new year.”

Davies said the realtors association will continue to raise its concerns about further mortgage changes. The association’s political action committee plans to work on a game plan, which will likely involve recruiting municipal and other government support to ensure their message reaches the right ears.

Despite the stress test headwinds, area realtors remain optimistic 2018 will prove a better year than 2017.

“We’re really looking forward to seeing the improvements in the economy.”

Nationwide, the Canadian Real Estate Association is projecting a 5.3 per cent drop in home sales to 486,600 units, with most of that attributed to falling sales in Ontario.

Mortgage stress test changes are expected to be felt most strongly in the red-hot housing markets of Toronto and Vancouver, but will be felt in markets throughout the country, says the association in its forecast released last month.

“Indeed, new mortgage rules are expected to lower 2018 sales in all provinces except Quebec and Newfoundland and Labrador.”

Average prices in Alberta, Saskatchewan and Newfoundland and Labrador are “forecast to either hold steady or edge back slightly in 2018,” a trend similar to 2017.

In Alberta, 2017 sales were projected to hit 56,200, up 7.7 per cent. This year, projected sales are 54,600 units, down 2.8 per cent.



pcowley@reddeeradvocate.com

Like us on Facebook and follow us on Twitter

mortgagesReal Estate

Get local stories you won't find anywhere else right to your inbox.
Sign up here

 

Impact of new mortgage rules uncertain

Just Posted

Although B.C. has not made masks mandatory in public indoor spaces, some business owners are requiring all customers to wear them before entering their store. (Ashley Wadhwani/Black Press Media)
Mandatory indoor mask wearing starts Monday in Red Deer

A municipal bylaw requiring masking in public indoor places takes effect Monday… Continue reading

A pedestrian makes their way through the snow in downtown Ottawa on Wednesday, Nov. 25, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Wild winter, drastic swings in store for Canada this year: Weather Network

Wild winter, drastic swings in store for Canada this year: Weather Network

In this Saturday, Nov. 21, 2020, photo taken through a camera lens the word "pandemic" in seen in a dictionary in Washington. Dictionary.com declared “pandemic” its 2020 word of the year. (AP Photo/Jenny Kane)
Dictionary.com picks ‘pandemic’ as its 2020 word of the year

NEW YORK — On Dec. 31, China reported a cluster of pneumonia… Continue reading

NDP Leader John Horgan, left, speaks as local candidate Ravi Kahlon listens during a campaign stop at Kahlon's home in North Delta, B.C., on April 18, 2017. THE CANADIAN PRESS/Darryl Dyck
B.C.’s economic recovery minister says getting through pandemic will be team approach

VICTORIA — The British Columbia cabinet minister appointed to lead the province’s… Continue reading

In this photo released by the official website of the Iranian Defense Ministry, military personnel carry the flag draped coffin of Mohsen Fakhrizadeh, a scientist who was killed on Friday, in a funeral ceremony in Tehran, Iran, Monday, Nov. 30, 2020. Iran held the funeral service for Fakhrizadeh, who founded its military nuclear program two decades ago, with the Islamic Republic's defense minister vowing to continue the man's work "with more speed and more power." (Iranian Defense Ministry via AP)
Iran says Israel remotely killed military nuclear scientist

TEHRAN, Iran — A top Iranian security official on Monday accused Israel… Continue reading

Idyllic winter scenes are part of the atmosphere of the holiday season, and are depicted in many seasonal movies. How much do you know about holiday movies? Put your knowledge to the test. (Pixabay.com)
QUIZ: Test your knowledge of holiday movies and television specials

The festive season is a time for relaxing and enjoying some seasonal favourites

FILE - In this Feb. 11, 2019 file photo, George Clooney participates in the "Catch-22" panel during the Hulu presentation at the Television Critics Association Winter Press Tour at The Langham Huntington in Pasadena, Calif. In a Sunday, Nov. 29, 2020, interview on “CBS Sunday Morning,” Clooney said he's been cutting his own hair for more than two decades with a Flowbee device. (Photo by Willy Sanjuan/Invision/AP, File)
George Clooney’s secret to cutting his hair, as seen on TV

LOS ANGELES — George Clooney is just like us, maybe. The star… Continue reading

Gold medallists in the ice dance, free dance figure skating Tessa Virtue and Scott Moir, of Canada, pose during their medals ceremony at the 2018 Winter Olympics in Pyeongchang, South Korea, Tuesday, Feb. 20, 2018. THE CANADIAN PRESS/AP-Charlie Riedel
Ice dance star Tessa Virtue happily out of her comfort zone in Queens EMBA program

TORONTO — Tessa Virtue doesn’t feel the same sense of exhilaration or… Continue reading

Conservative MP Pierre Poilievre speaks during a news conference Monday, Nov. 16, 2020 in Ottawa. Poilievre says building up the Canadian economy post-pandemic can't be achieved without a massive overhaul of the tax system and regulatory regime. THE CANADIAN PRESS/Adrian Wyld
Conservatives attack Trudeau’s ‘reset’ but they have ideas for their own

‘We don’t need subsidized corporate welfare schemes that rely on endless bailouts from the taxpayer’

In this undated photo issued by the University of Oxford, a volunteer is administered the coronavirus vaccine developed by AstraZeneca and Oxford University, in Oxford, England. Pharmaceutical company AstraZeneca said Monday Nov. 23, 2020, that late-stage trials showed its coronavirus vaccine was up to 90% effective, giving public health officials hope they may soon have access to a vaccine that is cheaper and easier to distribute than some of its rivals. (University of Oxford/John Cairns via AP)
Moderna chairman says Canada near head of line for 20 million vaccine doses

Trudeau created a firestorm when he said Canadians will have to wait a bit to get vaccinated

There were 47 new COVID-19 cases in Alberta Tuesday. (THE CANADIAN PRESS/Paul Chiasson)
Spread of COVID-19 in Brampton, Ont., linked to systemic factors, experts say

‘We’re tired. We’re numb. We’re overworked. We’re frustrated, because it’s not our rules’

The courthouse in Iqaluit is shown on Wednesday, Oct. 7, 2020. Three Nunavut judges, including the chief justice, are at odds over whether prison conditions caused by the COVID-19 pandemic should be considered when sentencing offenders in the territory. THE CANADIAN PRESS/Emma Tranter
Nunavut judges disagree on how to sentence offenders during pandemic

IQALUIT — Three Nunavut judges, including the territory’s chief justice, are at… Continue reading

A corrections officer opens the door to a cell in the segregation unit at the federal Fraser Valley Institution for Women during a media tour, in Abbotsford, B.C., Thursday, Oct. 26, 2017. Independent reviews of the hundreds of inmates placed in segregation over the past year found only a handful were inappropriate, new government data indicate. THE CANADIAN PRESS/Darryl Dyck
Few federal inmates moved from solitary after external reviews, new data show

‘There can be rare cases where the removal may not be immediate’

A couple embrace during a ceremony to mark the end of a makeshift memorial for victims of the Toronto van attack, at Yonge St. and Finch Ave. in Toronto on Sunday, June 3, 2018. THE CANADIAN PRESS/Cole Burston
‘I’ve been spared a lot,’ van attack survivor says as she watches trial alone

Court has set up a private room for victims and families of those killed in the Toronto van attack

Most Read