The new mortgage rules for Canada, which went into effect on October 15, will have a positive impact on the Timmins real estate market and home buyers, according to Ellen Pankiw, the president of the Timmins Cochrane and Timiskaming District Association of Realtors.
“I agree with what the government is trying to do to slow down the rising housing prices in the real estate market,” Pankiw said in an interview with Timminstoday.com.
“It’s a good move to protect home buyers, particularly first time home buyers” she said.
“As a result of the changes home buyers, especially first time home buyers, will no longer be able to take out a hefty mortgage on expensive home, because it will more expensive to carry the mortgage as insurance cost will be greater on higher debt ratio properties,” she added.
The cost of mortgage insurance for buyers who put up a larger deposit of say 25 percent down payment will be lower than for those who only put down 5 percent down payment and take out a larger mortgage to purchase the home
“I don’t think we will see too many negative effects from the changes,” she added, “It will be better for the buyer because it forces them to buy a more affordable house and take on manageable mortgages,” Pankiw stated.
Home buyers who overextended themselves putting up very little equity as down payment are more likely to default on a mortgage leaving the banks to absorb the loss.
“The problem is not so much with fixed rate mortgages, but really with variable rates, because the buyer maybe able to afford it at the lower rate,” Pankiw explained, “but what happens if the mortgage rate increases and then the washer or the car breaks down, and you have additional costs - or if one of the couple loses their job?
“I hate to see first time home buyers lose their home because of changing situations in their lives and being saddled with a mortgage and a house they cannot carry,” said Pankiw.
Pankiw said she thinks the new mortgage rules will also have a moderating affect on the heated housing market, because if buyers are purchasing more lower priced homes ill it will have a downward pull on higher priced houses.
“Also I think closing the loophole that allowed foreign investors to purchase homes and call them their primary residence is a good thing,“ Pankiw said. “It is absurd to permit these homes that are not occupied by the owners to count as primary residences and allowing them tax breaks.
The rules introduced by Finance Minister Bill Morneau last week are considered to be a gentle tweaking or adjusting of existing mortgage rules and corresponding tax regulations such as closing the primary resident loophole for foreign home buyers.
Also the introduction of a mortgage-rate “stress test” will let buyers know what price of home they can purchase, or if indeed, they should be getting into the housing market.
“Canadians have told us they are concerned about growing household debt and rapidly rising house prices in some of our biggest cities, particularly in markets like Toronto and Vancouver,” Morneau said.
“These concerns have grown over many years, and there are no quick fixes,” he added.
“The federal government plays an important role in ensuring that housing markets are stable, and function efficiently,” Morneau explained. “My colleagues and I are committed to continuing to work with provinces and municipalities to address the concerns of middle class families, and to ensure Canada’s housing markets and financial system remains strong, stable and resilient well into the future.”
In a news release issued by the Ministry of Finance October 3, 2016 changes were hailed as the Government of Canada’s commitment to help the middle class families facing high debt and concerns about housing affordability.
The Ministry of Finance will be monitoring and addressing the overall health and stability of the housing market and financial system in Canada.
Morneau said that the measures introduced are designed to reinforce the Canadian housing finance system and to help protect the long-term financial security of borrowers and all Canadians, and to improve tax fairness for Canadian homeowners.
The newly introduced changes are designed to:
- Bring consistency to mortgage insurance rules by standardizing eligibility criteria for high- and low-ratio insured mortgages, including a mortgage rate stress test;
- Improve tax fairness by closing loopholes surrounding the capital gains tax exemption on the sale of a principal residence; and,
- Consult on how to better protect taxpayers by ensuring that the distribution of risk in the housing finance system is balanced.
For more information:
