New mortgage rules aimed at cooling red-hot housing markets will create more competition for entry level homes in Barrie, according to a local mortgage broker.
Nicholas L'Ecuyer, managing partner of Verico The Mortgage Wellness Group, says the changes seem to have the most significant impact on first time home buyers and lower-middle class house hunters.
"Creating more demand for entry level houses without having an answer for the limited supply of these houses can only mean that the houses in this segment of the market will increase, even more than they already have," said L'Ecuyer.
"It will also inevitably force some buyers completely out of the market."
He says people will have to adjust their expectations.
"What used to be a $400,000 buyer is now a $300,000 buyer. A $300,000 buyer is now a $200,000 buyer and a $200,000 buyer is likely now no longer able to buy in this market unless they drastically change their home buying criteria."
The federal government introduced the measures in the hopes of trying to cool the hot housing market, particularly in cities like Toronto and Vancouver.
Starting Monday, all insured mortgage applications - regardless of term - are subject to a "stress test."
Home buyers have to qualify for a mortgage under the Bank of Canada Benchmark rate which is currently 4.6% even if the rate they're applying for is the average of 2.49%.
This measure is designed to ensure buyers could still afford to make payments if mortgage rates go up.
L'Ecuyer's firm did not see an influx of mortgage applications prior to this week.
"We were very proactive in reaching out to our clients who are pre-approved and shopping to ensure that they were aware of the new rules and they would effect their buying power," he said.
Mortgage brokers are now using a term they didn't think existed.
"We need to get every prospective home buyer RE-pre-approved to ensure they know what they qualify for with the "stress test" included."
