’Tis the season… this was no surprise here! The latest round of mortgage guidelines has been announced by OSFI, or Office of the Superintendent of Financial Institutions. As of January 1, 2018, all conventional or uninsured mortgages will have to qualify at the Bank of Canada 5-year fixed rate or the contractual rate + 2%, whatever is greater. What does this mean? Nothing for anyone wanting to renew or buy real estate with less than 20% down. But anyone wanting to access their equity might just have to consider a slightly lower amount. And those wanting to purchase real estate with 20%+ down may need to adjust their expectations or relocate their search area.
Next question on many people’s minds is how this will affect prices. Based historical data, I predict that there will be very little decrease in prices. Most people thought the ‘bubble’ was going to explode. Most comments were, “It just has to, how can prices continue to increase?” Well guess what… prices have continued to increase. Some market segments will experience a slight softening, but nothing drastic.
What will happen in 2018?
There is no need to slam your fist on the panic button. This is simply the new normal for mortgage finance consumers. The sun will still rise in the east and set in the west. The earth will continue to rotate in a counterclockwise direction. People will still buy and sell real estate. Those consumers with available equity will still have access to it and borrowers will still renew existing mortgages. If you are receiving or buying into “the world is ending” type information, please look away… it’s wrong and misleading.
If you are worried about things you cannot control, stop it! If you are going to put any energy into something, I would recommend building a bulletproof personal borrowing profile. More than ever it’s vitally important to have AAA credit, minimal-to-zero consumer debt and strong reliable income and savings. If you start with that, I can assure you everything will be OK!”