4.64% “The Stress Test”

There is a very hot trending topic circulating around the real estate and portage world these days. It has been dubbed: The Buyers “Stress Test”. This topic is so hot, Mortgage Professionals Canada has launched a new web-based consumer advocacy campaign and website to highlight “the negative impacts of the federal government’s changes to mortgage insurance and eligibility,” stating that the federal government should make “reasonable, common-sense changes to the new rules”.

They have also been quoted as saying “Our members are working with and seeing directly that many Canadians are frustrated by the impacts of these changes and are looking for ways to reach out to the government directly.” The Real Estate community in Regina can echo these feelings as a majority of the Real Estate Professionals feel the same decline in some of their businesses.

The Mortgage Professionals Canada is encouraging anyone who has been negatively impacted by these changes to visit the website to send a letter to their MP.  A move I believe anyone here in Regina and across Saskatchewan should consider doing as well. I have seen first hand how lobbying your local MPs about the negative impacts the changes are having on housing activity can be extremely effective. Saskatchewan is getting lumped into the same markets as Vancouver and Toronto by the Government of Canada. While we do have a very healthy and active real estate market here in Saskatchewan, dollar volume being traded is nowhere near the same. We have enough challenges trying to find affordable housing and for the government to tack on additional costs that are being placed on the Canadian middle class through higher rates and reduced purchasing power – makes owning a home a pipe dream for younger Canadians or people starting out in the market.

Some recent statistics I saw in an article was that: 33 percent of all mortgages in Canada and nearly 50 percent of mortgages for first-time home buyers, representing approximately $80 billion in annual economic activity.  Right now, all insured mortgages need to qualify at either the Bank of Canada benchmark rate which is 4.64 percent or the contract rate offered on the home buyer’s commitment, whichever is greater.

The Mortgage Professionals Canada and a majority of the Real Estate Boards would like to have the government “decouple the stress test rate from the posted Bank of Canada rate and instead, set the stress test based on a market rate, either by looking at the Canadian 10-year bond yields or having the Bank of Canada set a rate that is independent of the average of the banks posted rates.”

A common thought is that all mortgages should be required to qualify at the stress test rate, not just insured mortgages. A lot of lending firm have launched websites to advocate for a change in the rules, One great example is Dominion Lending Centres which launched the website NewRulesHurt.ca. Most Mortgage Brokers and Real Estate Professionals understand and agree with the government’s desire to protect consumers, but they also fundamentally disagree with the proposed approaches to doing so, as it will make housing less affordable for the middle class or first-time buyers.

Reports coming from the lenders I work with state that these changes have cut Canadian’s purchasing power by upwards of 20 percent and have ultimately made housing less affordable for Canadians.  If you or someone you know has been negatively affected by The Mortgage “Stress Test” I encourage you to write a letter to your MP and share your voice, or seek out one of these websites and seek additional information on how to make your voice heard.

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Peter Fourlas – Regina Realtor®
Real Estate Agency
3889 Arcola Ave East, Regina, SK S4V 1P5
Phone: (306) 529-0009
Web: www.brandonw343.sg-host.com
Email: Peter@pfourlas.ca