CHMC High Ratio Mortgages will now give you a better rate then mortgages with 20% down or more. For example a 5 year with 5% down is around 2.99% and that same 5 year with 20% would be 3.19% and 20% down for a refinance would be 3.29%. Every mortgage now has to qualify at 4.84 regardless of the term and rate sellected.
What will this mean for our local market? I believe this will mostly impact the first time buyers, especially the ones with large student loans. Your debt ratio cannot exceed 32/40. This will impact how much you are able to afford for example: before these qualifying changes and interest hikes a buyer would have been able to purchase a $350,000 home and may now only be able to purchase a $275,000 home. A lot of our market inflation this year has been city buyers around the baby boomer age. These baby boomers want out of the city and want into the small town/city life. I believe they will keep buying here. It just means their houses in the city might not sell for as much as before and may take longer to sell. Some of these changes have already been impacting the market for the last 4 months and we still have a steady market due to the lack of inventory. When speaking with local mortgage professionals they informed me that they may have had 2 out of 50 of their deals were impacted by these changes.
The biggest change will target home buyers with more than 20%. They would have to qualify based on a rate 200 basis points above their contract.
The Toronto Real Estate Board reported that August sales were down 35% from a year ago while prices are off more than 20%. What does this mean? The foreign buyers are getting scared off buy all the qualifying changes, the tax added on for foreign buyers and now the rise in the Canadian dollar. Again I believe these major changes will only take dramatic affect on the larger cities. Our Kingston, Napanee, Prince Edward County and Belleville market are still at a large lack of inventory which is keeping prices high.