New mortgage rules will affect some local buyers

Tighter mortgage rules could mean changing expectations for some Central Alberta home buyers

The chill of new mortgage rules aimed at cooling off Canada’s hottest housing markets has been felt in Central Alberta.

Fortunately, it’s an impact more nip in the air than icy blast, say local real estate experts.

Dale Russell, broker and owner with Re/Max Real Estate Central Alberta, said the measures have already had an impact for some home buyers caught midstream by the new rules, which were introduced with little warning.

Those planning to upgrade may be most affected by the rule changes, which narrow their price-range options.

He’s heard of one family that had sold their home with plans to upgrade only to find that under the new mortgage tests they no longer qualified for their intended new home mortgage.

As of Oct. 17, all insured mortgages will have to undergo a stress test to determine if the borrower will still be able to make their mortgage payments if interest rates rise. Other measures are aimed at reducing foreign buyer home flipping.

Previously, these stress tests weren’t required for fixed-rate mortgages longer than five years.

How big an impact the mortgage measures will have is difficult to determine. Certainly, many buyers won’t have any problems meeting the new financing thresholds but Russell expects some will have to rethink their future housing plans.

He questions whether measures seemingly aimed at red-hot housing markets in Toronto and Vancouver needed to be applied on a national level.

“In Alberta, we have our own challenges. We don’t need anything to cool our housing markets.”

Larry Westergard, executive officer for the Central Alberta Realtors Association, polled some of its members to get a sense of what was happening since the mortgage announcement.

General consensus was that it triggered a flurry of home buying as those ready to move tried to seal the deal before new rules applied. Multiple offers, mainly in the starter home range, resulted.

However, that urgency was felt mostly by those on the “razor’s edge” of qualifying under the new rules.

“It appears that the balance of the market was more concerned with finding the right home for their needs,” said Westergard.

There has been some anecdotal evidence that high-ratio mortgage qualifiers were seeing their purchasing power drop but it is too soon to tell how many buyers will be affected.

“We’re only a few weeks into it. So trying to figure out what the impact on that is going to be tough for at least the next couple of months until we start to see people adjust to it.

“It’s probably going to impact a small margin of people who are in the market.”

As real estate is heading into its slowest period of the year, “really the litmus test for it is going to be when we come into the spring market next year.”

Westergard said while it’s understood what the new rules were trying to achieve and association members always advocate that their clients buy within their means.

He agrees that it appears the measures were a national reaction to overheated markets that may have “unintended consequences” for other markets not in the same situation.

Chad Jensen, owner and broker with Red Deer’s Royal LePage Network Realty Corp., doesn’t believe the rule changes will have a large effect on the housing market.

In the long run, the changes may create a more stable market, here and elsewhere.

“Personally, I think people are kind of addicted to these low interest rates, which I don’t think is a good thing in the long run.

“I agree that (the mortgage changes) are bad timing for Central Alberta right now because of the market conditions, but I do feel it’s going to make us stronger in the long run, especially in Alberta, where we have that boom-bust cycle.”

pcowley@bprda.wpengine.com

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