{"id":12093,"date":"2019-04-09T10:10:16","date_gmt":"2019-04-09T17:10:16","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=12093"},"modified":"2019-04-08T11:57:48","modified_gmt":"2019-04-08T18:57:48","slug":"what-changes-can-actually-help-canadian-homebuyers","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/04\/what-changes-can-actually-help-canadian-homebuyers\/","title":{"rendered":"What Changes Can Actually Help Canadian Homebuyers?"},"content":{"rendered":"<p style=\"text-align: justify;\">Canada\u2019s stress test for uninsured mortgages has been under fire from the real estate industry, but it appears policymakers are unlikely to budge and scrap the year-old measure.<\/p>\n<p style=\"text-align: justify;\">There may, however, be ways to change the mortgage stress test to help homebuyers without getting rid of it altogether, experts suggest. In fact, a recent report suggests regulators are considering adjusting the rules, which currently require mortgage applicants to qualify at higher rates than they are actually signing on for, sending shockwaves through the housing market.<\/p>\n<p style=\"text-align: justify;\">The impact on market activity has been palpable, with Canadian home sales down 4 percent on a year-over-year basis as of January. So what exactly should policymakers do as they weigh debt-related risks to the economy and the health of the housing market? Here\u2019s what experts are saying the changes should look like.<\/p>\n<p style=\"text-align: justify;\"><strong>Lower the stress test<\/strong><\/p>\n<p style=\"text-align: justify;\">The stress test introduced last January in an effort to cool the housing market requires uninsured mortgage borrowers to qualify at either 200 basis points over their contract rate or match the Bank of Canada\u2019s five-year benchmark rate, whichever is higher. Previously, stress testing only applied to insured mortgages, so if a borrower could muster a 20 percent downpayment to avoid mandatory mortgage insurance, they could sidestep the stress test, too.<\/p>\n<p style=\"text-align: justify;\">While industry group Mortgage Professionals Canada supports a stress test, its CEO Paul Taylor says the threshold should be lowered. \u201cWe\u2019ve always been advocating for a bit of a reduction, we\u2019ve never advocated for an elimination of it,\u201d he says. Taylor says the test should be loosened to 75 basis points above the contract rate. Given the most common mortgage type is a five-year fixed-rate, borrowers have years to build equity before they need to renew at a new rate. Household incomes also generally increase over time. That gives a homeowner some flexibility in the face of potentially higher rates in the future.<\/p>\n<p style=\"text-align: justify;\"><strong>Waive the test for mortgage renewals<\/strong><\/p>\n<p style=\"text-align: justify;\">If a borrower\u2019s mortgage comes up for renewal today, they\u2019ll need to pass the stress test again if they want to shop around for a better rate from another lender. \u201cThey\u2019re held hostage by the first bank,\u201d says Phil Moore, president of the Real Estate Board of Greater Vancouver. \u201cNow, that\u2019s not fair to Canadians,\u201d he adds. He recommends waiving the stress test to improve fairness. \u201cBanks are cashing in on all those renewals.\u201d<\/p>\n<p style=\"text-align: justify;\">Mortgage Professionals Canada\u2019s Taylor agrees. \u201cIf you\u2019ve shown that you can pay your mortgage as agreed, and you\u2019ve got a payment history of that, then requiring you to qualify at the next lender only makes it more difficult for you to shop the market and get a competitive rate,\u201d he says. \u201cSo there\u2019s a lot of consumers across the country that are probably paying more interest than they otherwise would be.\u201d<\/p>\n<p style=\"text-align: justify;\"><strong>Reward bigger downpayments<\/strong><\/p>\n<p style=\"text-align: justify;\">The stress test is a broad measure. No matter where you are in Canada, if you want to take out a mortgage from a federally regulated financial institution, you\u2019re going to be tested. But it\u2019s also a one-size-fits all approach regardless of how much you put down. REBGV\u2019s Moore suggests that should change.<\/p>\n<p style=\"text-align: justify;\">He floats the idea of a scaled approach, where borrowers who put forward bigger downpayments face a lighter barrier.\u201dMaybe if there\u2019s a 30 percent downpayment, maybe it\u2019s (the stress test) 1.75 percent\u201d above the contract rate, he says by way of example.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2019\/03\/3-ways-change-mortgage-stress-test-canadian-homebuyers.html\" target=\"_blank\" rel=\"noopener noreferrer\">3 Ways to Change The Mortgage Stress Test That will Actually Help Canadian Homebuyers<\/a> by Josh Sherman | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Canada\u2019s stress test for uninsured mortgages has been under fire from the real estate industry, but it appears policymakers are unlikely to budge and scrap the year-old measure. There may, &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2019\/04\/what-changes-can-actually-help-canadian-homebuyers\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-12093","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What Changes Can Actually Help Canadian Homebuyers? &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2019\/04\/what-changes-can-actually-help-canadian-homebuyers\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"What Changes Can Actually Help Canadian Homebuyers? &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Canada\u2019s stress test for uninsured mortgages has been under fire from the real estate industry, but it appears policymakers are unlikely to budge and scrap the year-old measure. 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