TGIF - Talking affordability and the new mortgage rules!

Friday, October 21, 2016

In this neck of the woods, we are always accused of being obsessed with real
estate (and the weather!) just like this obsession is unique to Vancouver
and environs. Well - guess what? I was in the tiniest village in Yorkshire
recently - Dent - for those Brits in the know -and found myself deep in
conversation with an elderly, long time resident. He lived in the most
beautiful stone cottage which had, in its time, served as the butcher's then
the pub - surrounded with hanging baskets, it was charm itself. His real
estate beef? - local residents can no longer afford the Dent cottages
because outsiders have bought them up for holiday homes and they lie empty
for much of the year - sound familiar? To add insult to injury in Dent,
these holiday makers bring their own food and beverage and don't add to the
village economy while they are there! It is universal folks!

Talking of affordability closer to home - the new mortgage rules announced
by the Federal Government will make it more difficult for first time buyers
to get into the market. Buyers with less than 20% down will have to qualify
on the posted Bank of Canada rate regardless of the term of their mortgage.
For instance, a buyer taking a 5 yr. fixed rate mortgage at 2.39% interest
rate would previously have been qualified to purchase using the 2.39% rate -
now the buyer will have to qualify at the BOC posted rate - currently 4.64%.
The net result of this is an approximate 20% reduction in the amount of
mortgage money being made available to the buyer.

I just heard from a person previously anticipating buying at $400,000 - now the price tag has to
be $340,000. It will take a little while, but there will be a ripple effect
as fewer people buy at the first rung of the housing ladder, affecting the
number of people upgrading from their first home to a second and so on.
Watch this space! Not clear on anything, please call us.

Enjoy the sunshine between the showers. And remember, we always have you
covered! Sheila and Michelle.

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