In Nutshell, how these rules will effect you….will be affordability of what you can purchase. For example someone who could previously afford $500,000 mortgage, now due to new rules in effect, their affordability have dropped down to Approx. $400,000. Just to keep it simple, all these rules combined make the affordability drop by 15% – 20%.
This is expected to force Bank of Canada to maintain existing low interest rates for a while. Which may encourage all major retail banks to reduce their lending rates to end consumer to reduce this gap between affordability and home prices. We can already start seeing this happening as lowest 5 Years & 3 Years Fixed rates now available currently are as low as 2.89% & 2.69% respectively. Such incentives will reduce that affordability gap by 10% – 15% instead.
As summer months are historically proven to be more active for real estate business, these rules may effect the overall activity in the market, which we are already seeing happening but housing still being a basic necessity, will keep the momentum going…..even though @ slower pace compared to same time last year.
Buyers may need to weight between their needs and wants and settle for less whereas Sellers may not enjoy multiple offer situations on their properties any more. In nutshell both have to tone down their expectation levels in order to accomplish the final result.
For Qualified Buyers, who were planning to buy lower then their qualifying limits….this will be exceptional opportunity to secure something of their choice at a reasonable price with lowest mortgage rates.
Overall, these rules are for betterment for our housing market. Precaution is better then cure!