We all know that the talk of the town coming into the end of 2016 related to new mortgage rules introduced by CMHC requiring homebuyers to make larger down payments on some purchases. These rules came into force in November of 2016. Some speculated that this would have an impact on the Canadian housing market, so we thought we would take a look at the outcome now that the rules have been in place for a few months.
Because the new rules dealt with larger down payment requirements to homebuyers buying homes valued at $500,000 or more, some industry professionals surmised that first-time homebuyers would feel the change most. This seems to be the case. Many major news outlets are now reporting that the new rules have had an impact on first-time homebuyers, with many choosing to scale down the type of home they originally planned to purchase and even put off the purchase of their first home. Read a good overview from MoneySense here.
According to the Globe and Mail, in major urban centres like Toronto, some first-time buyers are actually choosing to purchase less expensive properties outside the GTA. This is largely due in part to the fact that there isn’t too much you can buy in the GTA in terms of single family homes under the $500,000 mark. Read more on this here.
While first-time homebuyers have looked to adapt to these changes, so too have some alternative lenders. It seems the practice of bundled loans has picked up steam as one way that lenders can offer first mortgages with less down payments, thereby avoiding the new rules altogether.
All in all, the new rules haven’t seemed to shake Canada’s continually strong housing numbers. As evidence, the Teranet - National Bank National Composite House Price Index™ reported in January that the December housing numbers (one month after the rules came into effect) experienced an increase of 0.3%. This was Canada’s 11th consecutive month of increases in detached single-family home prices and the largest 12 month increase since June of 2010, with Toronto leading Canadian cities.
Even with the new rules, Canadians continue to buy and where impacted by the new rules are simply adjusting their plans to buy what they can afford within the new guidelines.
So what’s in store for 2017? Aside from CMHC’s plans to hike high ratio insurance premiums this March, it seems that there is little in the works in terms of new rules coming down the pipe from the Canadian Federal Government. What do you think we will see over the coming months?
And as always, if you or anyone you know has a mortgage question contact an MA broker / professional today!