New rules for buying homes

Jim Flaherty has announced over the last few days that there are new rules for buyers qualifying for a mortgage when buying homes.

These new rules essentially get broken down into two main points:

1) All borrowers need to meet the standard for lending based on a 5 year fixed rate mortgage; they are still allowed the option to go ahead with the lower rate variable mortgage but they must meet the fixed 5 year requirements.

2) Government's are lowering the maximum that homes can be refinanced for from 95% to 90%. They are also requiring the 20% down payment for government backed mortgage insurers for "speculative properties".

What does this mean?

A lot of people see this as a clear indication that mortgage rates will be on the rise and in the very near future. When I discuss interest rates with clients and colleagues it seems like there is a certain general knowledge that interest rates will go up eventually; at the current rates it is tough for them to continue to go down!

There has been some indication that Jim Flarerty has also said that by the end of 2010 rates should be increasing; again it is tough to argue that they can remain so low for so long.

What does this mean to the average consumer?

If you are in the market for a home, than now is as good of a time as any. With rates still low it is a great opportunity to take advantage of the low cost of borrowing.

As a second point to people in the market to buy these rules shouldn't affect people all that much; I would hate to see people leveraging themselves to be qualifying for homes that they can just barely afford; and if their rates go up a point or two they will be in a situation where they may not be able to pay the mortgage! As for the 20% down; this has been around for awhile the government is just demanding this out of any speculative buyers which is not the boat that the majority of home buyers are in.

This will defiantly be the topic of conversation around water coolers at Real Estate offices and there may be more news on the horizon, specifically about first time home buyers. Nonetheless it will be interesting to see how this plays out.

Thanks for reading,

David Kurt
Sales Representative
Coldwell Banker Charles Marsh Real Estate