• not-approvedIf you are a loyal reader to our blog, you may realize that I enjoy predicting the future. Robert Floris’ Mortgage Architects office, we have had many of our predictions come true, but we certainly have not been perfect as well. Several years ago as the price of oil tanked, we thought Alberta’s real estate would take a hit. Well the truth is it has, but not as bad as I believed it would. Earlier in the spring we believed this frenzy in Hamilton would not last and would not end well. So far we appear to be spot on. Prices have tumbled and many consumers bought homes without conditioning the sale of their homes. The market has certainly changed.

    Well, here come the predictions, for whatever they are worth. We will check in late 2018 to analyze how right or wrong we will be. The predictions are based upon the new stress rules which take place on January 1, 2018. The new rules state that uninsured mortgages must qualify at the Bank of Canada as five-year rate [currently at 4.99%] or at the contract rate plus an additional 2%. This new rule was intended to ensure that uninsured borrowers could afford higher interest rates:

    • Fewer clients will be pre-approved for what they want
    • Fewer clients will be able to enter the real estate market
    • This will alter the demand/supply curve to the sellers
    • Conventional/uninsured mortgages will drop considerably [especially purchases] as the stress test will apply the same as to insured mortgages
    • Parents will be less likely to give their kids the 20% down payment anymore
    • Banks and financial institutions will make life more difficult for borrowers due to the changing market and the vulnerability of not being insured by the government [CMHC]

    As described above, less clients entering the housing market and less affordability will have more downside pressure on prices than upside. It will continue to be a buyers market; the reversal of early 2017 [sellers market]. We shall survive, we always do. We just have to readjust our thought processes.

    Robert can be contacted at 905-574-9200 Ext. 215 OR by email at mortgages@robertfloris.com. You can fill out an application online here with absolutely no pressure and no obligation.

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