Mortgage Brokers More About Second Mortgage | Page 3

THE IMPACT OF C ANADA'S NEW
RULE ON THE REAL ESTATE
MARKET
• Canada’s new mortgage rule appears to be a grim prospect for most applicants. In fact, according
to the Bank of Canada, almost 10% of all prospective homebuyers with down payments of 20% or
more, can be disqualified. The new rules have made it tougher for prospective borrowers to
qualify for the mortgage.
• The current rate set by the Bank of Canada is 4.99%. Also, the applicants must pass a stress test
where they need to prove that they are capable of paying the mortgage even after an increase in
the rates. All this has made it difficult for Canadians to purchase the property. These new rules set
by the Canadian government are a means to control the real estate market in the larger cities.
• A lot of property was being bought by people in the larger cities of Canada, which was causing
overpopulation in those regions. In addition, the increased demand was causing the housing prices
to soar. Thus, in a bid to put a cap on the market, the government introduced the stress tests.
• While the new mortgage rules did cut down the real estate demand, it certainly did not affect the
prices, which are still sky-high. According to a study published by Royal LePage, a drop was
witnessed in the sales activity in the first quarter of 2018, in Greater Vancouver. In comparison to
the numbers in 2017, the sales of luxury homes in 2018 dropped by 38.2%, while the sales of
luxury condominiums dropped by 26.5%. Despite which, the prices of real estate in Greater
Vancouver went sky-rocketing; the prices for luxury homes rose by 5.2% (valuing each unit at
$5,792,941), while a rise 7% was seen in the value of luxury condominiums (valuing each unit at
$2,503,873) on an average.