Buyers are returning to the market.... its a good time to sell

Buyers are back so it’s a good time to sell.  Prices have settled through the summer and enough purchases have occurred that there are plenty of comparable sold properties on which buyers can base a purchase price.  In addition, the biggest impetus for buyers is that the federal government announced in mid October a new stress test on mortgages, set for implementation January 1 2018.  This new mortgage qualification rule is motivation for many buyers to jump in to the housing market.  The new rule will reduce buying power by 15% on average, depending of the home price. The new mortgage qualification rule does not apply to purchase agreements that are accepted on paper prior to January 1, 2018 (regardless of closing date) will be exempt from this impending rule.   Since the rule was announced last week, we’re already seeing listings getting far more showings and good acceptable offers. Read more

Why should Home Owners act now?

Well. In a few months (January 1 2018), the majority of buyers will see their buying power reduced.  That will shrink the size of the buyer market for each level of home.  Reduced market size usually translates into reduced prices.

We can help

We can help you to get your property staged, ready and listed to take advantage of this sudden surge in buyers, and avoid the negative impact of the January 2018 mortgage qualification rules. Call us to get started.

Linda Maguire

Sales Representative

905-220-7993 

The OFSI (the governing body in Canada for financial services) has just announced a MAJOR new change to mortgage qualification rules, which will become effective January 1 2018! The main change is a 2% increase in the “qualifying stress test” for all uninsured mortgages.  The result is that buyers’ purchasing power will drop significantly. 

What does this mean for YOU as a BUYER?

It means you will be required to qualify for your mortgage based on a rate 2% higher than the actual mortgage rate you would be obtaining from your lender.

So, if the actual mortgage rate you have obtained today for a mortgage were 2.99%, then after January 1 2018, if you were to restart the mortgage qualification process, you would have to qualify for that same mortgage based on a rate of 4.99% (2.99% + 2% for qualifying rule = 4.99%).  If approved, you still would make payments based on the 2.99% but you would not be able to get the mortgage unless your financial position allowed you to make payments based on 4.99%.

This higher qualifying rate would reduce the amount of mortgage you could afford and therefore reduce the purchase price of homes you would qualify to purchase!

On average this would reduce your buying power by approximately 14%, depending on the value of the home you are purchasing.  

Here is an example of the reduced buying power:

- The buyers plan to buy a new home
- The buyers have a down payment of $180,000 (they plan to put at least 20% down)

If the Buyers purchase BEFORE January 1 2018

• 2.99%, 30-year amortization
• Max Purchase Price = $900,000
• Down payment = $180K
• Max mortgage = $720K

In the Buyers purchase AFTER January 1 2018

• The buyers would have to qualify at 4.99% (30 year amortization)
• They would still get a mortgage rate of 2.99% (30-year amortization)
• MAX PURCHASE PRICE NOW FALLS TO $800,000
• Down payment $180,000
• Max mortgage amount reduced to $620,000

In this scenario, the buyers lose 11% in buying power.

What will happen to the market?

Its quite likely that buyers who have recently been considering a purchase will be motivated to move forward quickly, to lock in a mortgage before the new rules come into effect in January 2018, which should result in an immediate boost in buyer demand.  Sellers should also recognize that they have a short window to attract 2017 buyers.  In January, we’ll likely see a drop in buyer demand, as buyers adjust to the realities of their lowered buying power. 

We can help

More than ever, its critical that buyers enlist a mortgage professional to assist in the finances for buying a home. We can refer you to an expert to help with your lending needs.  We can also keep you on top of the shifting market.  Call us to get started.

Linda Maguire

Sales Representative

905-220-7993

Royal LePage, BurlOak, Burlington, ON

Source for this blog post: Tribe Financial | Sep 12, 2017

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