Could this proposed mortgage change be the bullet that really kills this real estate market??

The government has certainly taken many measures to cool the real estate market. It was not long ago that we could buy a home with no money down. Unbelievable how things have changed. It is my strong belief that if the Office of the Superintendent of Financial Institutions (OFSI) applies this new rule, it will be devastating for our current real estate market. In fact, in 26 years in the mortgage industry this is the worst and most impactful decision I have ever seen. What is this new rule? That all mortgages, both high ratio and now (proposed) conventional mortgages have to qualify at 4.64%. In other words, if you select a five-year term at 2.99%, now you must qualify at the higher rate. That is, you must show that you can afford the higher rate.

Robert Floris’ Mortgage Architects office in Hamilton, we try to be the best advisors in our local market. As I read the paper today, I see the headlines: “Toronto home prices plunge 17% since spring.” Part of the drop was that home price increases have become unsustainable. But a larger reason is the government intervention. These new rules have affected our mortgage office in the following ways in the past few months:

• causing people to walk away from their spring purchases
• houses now are selling much more slowly
• clients are putting pressure on realtors for the same prices as spring
• it is affecting a lot of conditional sales

The proposed rules will have this impact:

• affect the hundreds of thousands of Canadians who were preapproved under the old criteria
• for Canadians with high debt, their refinances will be rejected causing stress and potential sale of their home
• the purchasing power of Canadian homebuyers could drop as much is 18%

It is my opinion that introducing more difficult mortgage rules to the whole country will have a bigger risk than higher future rate increases. Why is this? The higher rates are already artificially here. The government has shown it cannot even balance its own budget.

Please let the market happen naturally.

Many good families and individuals could see their dreams of homeownership wiped out by these unnecessary government interventions.

Robert Floris is a Mortgage Agent located on the East Hamilton Mountain, serving Hamilton and the GTA and Ontario. He not only offers the best mortgage rates, but also honest advice and a financial plan at no charge to the client.

Robert can be contacted at 905-574-9200 Ext. 215 OR by email at mortgages@robertfloris.com. You can fill out an application online at https://application.malink.ca:8112/App/MARC/FLORISR/en-ca/1896 with absolutely no pressure and no obligation.

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