There have been a lot of changes in borrowing regulations (especially this month). The new interest rates lower the amount most homebuyers will be qualified to borrow. The shift in the desire to own one’s own home is also diminishing with Millennials who see houses as too expensive already and who want to have experiences more than things.
New federal guidelines require all federally regulated financial institutions to vet borrowers’ applications. This is done using a minimum qualifying rate equal to the greater of the Bank of Canada’s five-year benchmark rate. Or they can use their contractual rate plus two percentage points. This new mortgage “stress test” means many borrowers can’t borrow as much as they would previously have qualified for.
How are Canadians Working Through This Housing Market?
Today’s buyer who want a home to call their own, have started shifting their expectations. This includes less expensive housing options. Perhaps a different location, size or style of home. Some have also opted to buy homes with suites for mortgage supports.
Those not able or not willing to change their housing criteria may decide to wait a bit longer, while of course those buyers who pass the stress test will simply be able to carry on with their original plans. Or, with interest increases looking over their heads, they may also opt to purchase a home with a smaller mortgage.
What’s Next For the Housing Market?
The banks are going to continue raising interest rates. By the end of this year, there will be another hike in interest rates putting even more people out of the real estate game. If you are selling your home right now, it is imperative (more than ever) to price your home accordingly.
It may came down to reducing your options. If you do not feel comfortable with that think about how much you will get for your home in 6 months when the interest rates go up again.
As always, if you need help buying or selling in the current housing market in Saskatoon, do not hesitate to contact Gregg Bamford or Ryan Bamford.
