More New Mortgage Tightening Rules

Three times the Federal government has tightened up mortgage lending rules for those people with less than 20% down payment. Now they’ve made it much harder for those of us with equity of more than 20% to re-mortgage or to buy a new home as well.

I’ll join the economists, along with the Fraser Institute, who think this new stress-test has gone way too far, and will have a measurable impact on home sales, and most of us being able to qualify for a mortgage starting January 1st.

Here’s the new rule: No matter how much you earn or how much down-payment you have, you need to qualify for an arbitrary five-year posted rate. Right now you can get a 5-year rate of under 2.8% but you still need to qualify for the 4.9% sticker rate. Stupid but true. A family making $100,000 with 20% down can afford a home worth $726,000 right now. With the new rule, that same family’s purchasing power is down to a $570,000 home. That’s a $150,000 lesser mortgage or lower priced home.

Yet this is a family that has over 20% equity and certainly not someone who’s in any trouble of being foreclosed on. Still, they have to qualify on the “pretend” rate of 4.9%. That would be SEVEN rate increases, and that’s something we’ll never see!

If you’re not making $100,000 and are not totally debt free, you’re never going to qualify for any home that’s even the average price! In my case, I need to sell my home and down-size. But if I do that, I no longer qualify for a new mortgage. Talk about putting huge numbers of people into a total lose-lose catch-22!

Right now, you can still avoid this so-called B-20 rule with your credit union because they aren’t governed by federal regulations. But it appears that most of them will end up matching the rules at some point. All I can suggest starting January is to call a number of credit unions and ask. You don’t need to go in or fill out an application. Just ask if they’re also using the B-20 regulations.

1 thought on “More New Mortgage Tightening Rules

  1. Jocelyn Airey

    I too enjoy your comments on AM1150. After yesterday’s on air conversation, my husband was trying to explain to me what he thinks the federal government is doing with regards to mortgages. I am hoping that you might be able to explain, in layman’s terms, the concept of a false economy.
    Since your broadcast yesterday I have been reading and the similarities between the two Trudeau governments are scaring me. I know that my husband and I were buried in federal taxation in the 80s and 90s and I am scared for my son. I don’t know how to explain it properly to him so he understands. I hope my request is clear 🙂
    Thanking you in advance.

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