Guide To Coming Mortgage Changes
December 5 2017 Posted by Shawn Hawkins
Hello Friends, Colleagues, and Valued Clients,
Seeing the latest statistics from the Greater Vancouver Real Estate Board, it’s no wonder it’s been so busy this fall. This market has been very resilient in the face of some significant regulation changes over the past while. The latest one is coming next month.
Greater Vancouver property sales were up over 26% this November vs. last. That’s 17% above the 10 year rolling average. Detached home sales are up a huge 31%. Detached home prices are up 6.1% overall and apartments 23.9% - this difference is being driven by most buyers finding it easier to get financing for properties under $1m. Home prices also grew more in recent years. Overall, prices are up 14% in Greater Vancouver vs. fall 2016. Whistler has seen the largest price growth in the region at 30%. Despite the strength of sales, there are actually slightly more homes for sale than last year.
For applications received on or after Jan 1, 2018, a new “stress test” regulation will apply to most new mortgages with over 20% equity (those under 20% have had a similar stress test for a while now). For now, the rules in BC won’t apply to credit unions and private mortgage lenders, who are not federally regulated. Credit unions probably won't be far behind.
The “test” simply means that you might need to qualify based on a rate 2 percentage points higher than the one you will actually be paying. So, if you get a rate of 2.99%, qualification will be based on 4.99%, even though your payment is based on the lower rate. The idea is to protect people from stretching themselves. While my experience is that a large majority shop within their means, a handful don’t. I see this as a healthy thing for the market and economy and one that will further solidify our market, as we will have greater security that people are spending within their means.
Applications and pre-approvals made before Jan 1, 2018 are subject to the current rules. This can be held for up to 4 months, so you can finish the transaction until April under the present rules if you’re preapproved in December. If this might be you, let me know.
With the regulation changes in the past year or two, it is not surprising that alternative lenders have been very busy.
Particularly, private individual investment in mortgages is in huge demand.
As always, I welcome your questions and comments.