Finance Minister Bill Morneau introduced tighter new mortgage regulations last month, requiring a “stress” test for borrowers of Canada’s most common mortgage, the five-year fixed-rate.
It requires borrowers to qualify for loans at the Bank of Canada’s posted rate, which is about two percentage points higher than current offered rates.
Of course, most people aren’t going to see a pay raise of 20 per cent or more this fall, so the likely outcome of the new mortgage rules will be a decline in home sales (something the Finance Department itself predicted) and slowing or declining house prices.
In Toronto, you’ll need nearly 25 per cent more income (an extra $29,000 or so) than before to afford an average house, while in Vancouver you’ll need 27 per cent more — an extra $33,000 in income.
Fortunately, in Vancouver there is no relationship between income and housing prices. So this new rule is unlikely to have any effect. -ed.