If you have been concerned about your financial ability to purchase a home in the Great Vancouver area, I have some exciting news for you. There is a rare opportunity for home buyers starting in April. Perhaps you were previously unable to qualify for a mortgage because of the mortgage stress test introduced by the federal government in 2018. For the past two years, these difficult rules have sidelined many hopeful buyers. I know many of my clients are prospective first-time buyers who had saved for a down payment – only to be told that you did not have quite enough to meet the necessary minimum under the stricter rules. I’m sure many of you felt this was somewhat unfair, but you were also glad to see measures that eased demand and brought down prices in an overheated market – one that has now dropped to levels not seen since 2017. After two years of watching prices return to an affordable range, your patience is to be doubly rewarded.
Starting April 6, the federal government is making it easier for you to qualify for your mortgage. I will briefly describe how the new rules will change in this paragraph, but if you wish to skip over the technical jargon, please just give me a call. In simple terms, I can assure you that the bottom line will mean a big benefit to you – if you act now! Basically, under the rules of the past two years, your ability to meet monthly mortgage payments was tested using the five-year interest rate posted by Canada’s big banks. With some minor variability, this rate has recently been around 5 per cent. As of April 6, there will be a new stress test formula for calculating your mortgage rate. It will be the weekly median five-year fixed and insured mortgage rate based on mortgage insurance applications, plus two per cent. It’s not imperative that you are familiar with the technical issues in this new formula. What you need to understand is that this new formula will create a means for the rate to change in response to market changes much more quickly than was happening with the big bank rates. Some financial analysts have accused the big banks of delaying changes to their rate when it favoured them. The bottom line for the new rules is that they should help more people qualify for a mortgage.
But wait! There’s more. (That sounds like late night TV commercial – but it’s true!) You’ve probably heard the news that Canada’s Central Bank has recently lowered the nation’s prime lending rate to keep our financial markets liquid. In plain English, this means that the Bank of Canada is ensuring there is enough money available for credit buying as the world’s financial system is under stress. By lowering the prime rate – that is, the interest rate which is provided to the commercial banks for their borrowing, the big banks can then lower their lending rates to stimulate the economy. This applies to mortgages, of course, so at this time there is an even better reason for you qualify for your mortgage. With the lower rates you will have lower monthly payments, and with the eased stress test rules, you can qualify with a smaller down payment. However, I am encouraging you to move now. The market is a dynamic place, and when a lot of potential buyers decide to start buying, it can push prices higher. That’s why I am really encouraging you to take advantage of this double benefit without delay.
If you want to get an idea of how low a mortgage rate you can get at this time, go to: https://www.ratehub.ca
At the time of this writing, the lowest mortgage for a five-year fixed term was 2.24 per cent. Add 2.0 per cent to this figure to see the rate you would have under the new stress test rules. You have not had a bargain like this for a long time.
Please feel free to call me. I can work with you for your particular financial capacity, and help you get into that long-awaited home with no further delay.