New mortgage rules and other changes


Last week the federal government announced some changes to ensure that we as home buyers are not taking on bigger mortgages than they can afford. There was also a bit aimed at foreign buyers buying and their flipping of Canadian homes. Let’s start with that one as it will likely have the smallest affect on our Kitchener Waterloo real estate market.

New Rules for foreign buyers

The new rule aimed at foreigners is that everyone must report properties that they are selling to the CRA (Canadian Revenue Agency). The rule is aimed at foreign buyers claiming primary residence tax exemptions for which they are not entitled.

High ratio mortgages and the stress test

Essentially the new rule around high ration mortgages aims to ensure that homebuyers will be able to afford their homes if the interests rates go up. The rule makes the home buyer need to qualify for a higher rate than they can easily find offered up in the market. There are some other small changes to government backed mortgages but those are aimed squarely at Vancouver and Toronto.

The effect

All-in-all the largest impact of the new rules will be on first time homebuyers’ purchasing power. First-time homebuyers traditionally make up more than 30% of the market. In Kitchener-Waterloo one or two things or maybe both could happen.

1) It will delay the entry of first-time buyers into the market as they work on improving their personal purchasing power.

2) It will push more GTA buyers out of Toronto and into KW.

Also, since the new rules will mean buyers may only qualify for cheaper homes, it will make the lower price ranges even more competitive. This might help our condo apartment market which currently is the least competitive.

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