VANCOUVER (NEWS 1130) – A local mortgage broker reports business was up 30 per cent ahead of the new mortgage rules coming into effect today, but he expects a major slowdown in the coming months.
Wayne Mah with City Wide Mortgage Services thinks a very slow period is likely in the next two to six months given the rush he’s just witnessed by people trying to get in for a mortgage under the old system. “As always with any rule changes, there is what we call lag time, while everybody kind of digests the impact of the rule changes and things like that,” says Mah.
But there are a number of things going on here. While you’ve potentially lost some buying power, a number of economists, like Brian Yu with Central 1 Credit Union, are projecting price declines as a result of these changes and in Yu’s case, he thinks that could be in the range of five to 10 per cent within the year.
“We have moved back into balance now,” says Yu. “With the lack of that buying power, individuals are going to be pricing themselves a little lower in the market, others will be pushed out. Overall, that should really dampen the market conditions and sales and price activity going forward.”
He also expects higher mortgage rates could also be coming down the pipe, and that alternative lenders will lose market share when it comes to mortgages, with most people borrowing through major banks and credit unions.
The new rules involve a stress test for all insured mortgage applications to ensure the borrower can still service their loan in the event interest rates rise or their personal financial situation changes. Until now, stress tests were not required for fixed-rate mortgages longer than five years.
The federal government is making the change to try to stabilize the country’s housing markets, particularly in Vancouver and Toronto where prices have skyrocketed. Canadian mortgage brokers reported a flurry of borrowing last week as home buyers tried to get in under the wire.