“Clearly, it’s more difficult to qualify for a loan and that’s true for everyone. To the extent that, in our most expensive markets, it’s already hard enough already to qualify for a loan I think the biggest impact will be in those regions,” Dr. Sherry Cooper, chief economist with Dominion Lending Centres, told REP. “But incomes vary from city to city, and so even in lower class cities I think this could binding. It won’t be binding for everyone but it will certainly have an impact on the marginal borrower and the firs-time borrower.”
The federal government announced a number of housing policy changes Monday, all with the intention of safeguarding the industry from overheating.
One of those changes is around insured mortgages. As of October 17, all homebuyers who take out an insured mortgage will need to qualify for the Bank of Canada’s benchmark five-year rate.
With the current BoC rate at 4.64%, in some cases, clients will have to qualify for a mortgage that is more than double their contracted rate.
In a bid to get ahead of that policy, Cooper predicts some sellers may flood the market.
“The other thing is it might be the trigger that puts more supply onto the market as sellers who have been waiting; thinking that prices will go up forever might say this is the trigger to get them to list their homes,” she said. “I think this could have far-reaching effect.”
A wide-reaching policy change could force a boon in home sales in the short-term before causing a slight slowdown in various markets, according to one leading economist.