Stress tests: what impact for our housing market in 2018?

Monday, January 15, 2018 Written by Emmanuelle in News

Stress test rules

On January 1st 2018, new rules aimed at making sure borrowers can pay off their mortgages if rates were to rise are in effect. Last fall, the country's top banking regulator OSFI announced changes that will force lenders to “stress test mortgage applicants, to make sure they aren't borrowing too much. Prospective borrowers will now have their finances mocked up assuming rates are at one of the following two scenarios — whichever is higher

  • Two percentage points higher than whatever rate they are able to get from a lender.
  • At the five-year average posted rate, according to the Bank of Canada ,which currently sits at 4.99%.

Anyone who fails the test can't get the loan they are applying for, which means they'll have to either buy something less expensive with a smaller mortgage or choose not to buy. For more on the stress test:  http://www.cbc.ca/news/business/osfi-mortgage-rules-1.4358048 .

House prices /Will prices keep going up?

Not surprisingly, opinions on the matter are a little divided. But there's a broad consensus that the national housing market is on track to crank out more gains — even if they are smaller than many owners have gotten used to.

Ratehub's Laird says he expects a flat market nationally. TD's Dolega agrees, saying in a note to clients recently that "we anticipate a continuation of the soft-landing” Bank of Montreal economist  Robert Kavcic says “After years of double-digit gains, 2018 is likely to be a bit more muted”.

I agree with these economists and I would add that 2018 should in our market see prices continue to grow more specifically on condominiums, often a more affordable choice towards a first homeownership.

An ideal year therefore to choose to make a change of life, and to seize great opportunities.

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