Higher rates, tighter rules pose hurdles for new homebuyers | Money | Toronto Sun #realestate #Toronto

Wednesday, April 21, 2010

Higher rates, tighter rules pose hurdles for new homebuyers

Last Updated: April 20, 2010 2:35pm

Tighter lending rules coupled with rising interest rates means Canadians looking to buy their first home could face an uphill battle, mortgage experts say.

Bank of Canada Governor Mark Carney signalled Tuesday rates could begin to rise off near-zero levels as early as June 1.

“With recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus,” the central bank said following its announcement to leave rates unchanged, for now.

And just one day earlier, new government-backed mortgage lending rules aimed at protecting Canadians from getting in over their heads with debt once rates come off historic lows came into effect.

All this amounts to a good news/bad news story for first time homebuyers, Gary Siegle, a regional manager with Invis mortgage brokerage in Calgary, told QMI.

“There’s a new sense of urgency,” he said.

“It certainly creates heightened awareness about rates going up but it also effectively moves people on the edge of mortgage eligibility out of the picture.”

As of Monday, all prospective homeowners must meet the requirements for a five-year fixed mortgage based on the Bank of Canada’s posted rate, even if they choose a shorter-term mortgage product. RBC and some of Canada’s other major banks last week upped their rates to 6.1% from 5.85%.

“If you were already tight on income, you’re not going to qualify as of (Monday),” Siegle said, adding there are things first-time buyers can do to help avoid falling into this group.

Many mortgage providers offer rate holds for 120 days, which affords you time to shop around. Secondly, lower your budget, he said.

Existing homeowners are for the most part “pretty well prepared” for looming rate increases, Siegle said.

“It’s those not yet in the market who may have a tough time getting in.”

The rules will also help take some demand out of an already busy springtime real estate market, he said.

The previously announced changes were one of three factors fuelling buying in recent months. The expectation of higher interest rates and the introduction of the harmonized sales tax in the real estate hotbeds of B.C. and Ontario also drove a flurry of activity.

Other changes as part of the federal government’s new rules on mortgage lending include higher minimum down payments on investment properties, lower refinancing maximums and eligibility changes related to the stated income program. As on Monday, self-employed Canadians are only eligible for the program during their first three years of business, Siegle said.

Posted via web from Toronto Real Estate News, Blog


About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

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