Canadian real estate has been a tough nut to crack for some homebuyers, but those have less than 20 per cent as a down payment are about to face another challenge as Canada Mortgage and Housing Corp. (CMHC) tightens the qualification rules for borrowers of high-ratio mortgages. This move is in response to the global pandemic that has left many Canadians vulnerable. The changes, which include lower debt thresholds and higher credit ratings, take effect on July 1, 2020.
New Mortgage Qualification Rules:
If you have less than 20 per cent to pay down, CMHC will now be:
limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to its standard requirements of 35% (from 39%) and 42% (from 44%), respectively;
establishing a minimum credit score of 680 (from 600 previously) for at least one borrower; and
no longer treating non-traditional sources of down payment that increase indebtedness, as equity for insurance purposes.
What Is a High-Ratio Mortgage?
In order to buy Canadian real estate and qualify for a mortgage, buyers must have a minimum down payment of five per cent of the home’s total purchase price. However, when the homebuyer has less than 20 per cent to make as a down payment, they will need to take out a high-ratio mortgage, which requires mortgage default insurance. This is designed to protect the lender in case of mortgage payment default by the borrower. Insurance premiums can either be paid up front, or added to the mortgage payments.
Mortgage Changes & Canadian Real Estate
In the past, news of mortgage qualification changes have prompted a flurry of activity leading up to the deadline, as homebuyers tried to get in under the wire. This was the case before the OSFI mortgage stress test on high-ratio mortgages took effect in October 2016. The mortgage stress test was then expanded to all mortgages on January 1, 2018. Prior to these changes and others, transactions increased.
Leading up to the looming deadline, in November 2017 the Canadian Real Estate Association reported that national home sales in November 2017 were up 3.9 per cent month-over-month. Then in December 2017, Canadian real estate markets saw home sales surge 4.5 per cent month-over-month.
“National home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year,” Gregory Klump, CREA’s Chief Economist, noted in the Canadian Real Estate Association’s release. “It will be interesting to see if monthly sales activity continues to rise despite tighter mortgage regulations that took effect on January 1st.”
This time, however, RE/MAX did not anticipate a similar response from buyers.
CMHC is one of Canada’s mortgage insurers. CMHC’s two private-sector counterparts, Genworth Financial and Canada Guaranty Mortgage Insurance Co., have confirmed that they will not follow suit, meaning homebuyers with a down payment of less than 20-per-cent will still be able to get a mortgage at historically low interest rates.
“I think this time it’ll be a little bit less of a frenzy,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada. “Typically, when CMHC changes their requirements, the other insurers follow suit. This time they didn’t, so I think this is going to create better balance heading into the summer.”
Low Housing Supply, Rising Prices in Canadian Housing Markets
“RE/MAX wholeheartedly supports responsible lending practices, such as CMHC’s most recent adjustments to mortgages, but this is a temporary solution to a bigger issue – not enough housing supply to meet demand,” says Alexander, who points out that major hubs such as Toronto, Vancouver and Montreal will continue to be challenged to keep pace with demand in the foreseeable future – particularly due to the fact that our government continues to attract and promote more and more immigration to help bolster the Canadian economy. “This is a great thing, but all of those people are going to need a place to live.”
Alexander has been vocal about the need for a national housing strategy to address problematic inventory levels and resulting rising prices.
“There’s a huge delta between [supply] and demand, and there’s no national housing strategy to alleviate some of that pressure.”
Alexander further said in an interview with BNN Bloomberg, “If we don’t find a long-term strategy that will bridge the gap between supply and demand, we are going to continue seeing price appreciation and continued affordability issues in the foreseeable future.”
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.
Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.
The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.
Wednesday was the last day for advance voting, which started on Oct. 10.
More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.
Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.
An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.
This report by The Canadian Press was first published Oct. 17, 2024.
