November home sales in the Victoria area were up 12% over last year in what the Victoria Real Estate Board suggests is a buying blitz ahead of new mortgage rules in January.
“While not a record, it is the highest November sales count we’ve tracked since 1996,” says Victoria Real Estate Board President Ara Balabanian. “It is also rare that we see November numbers beat October’s. It’s a good example of how outside forces [ like government-led changes ] can impact a housing market.”
Starting January 1, uninsured buyers—those with a down payment of 20% or more—will be subject to mortgage stress tests to ensure they can cope with potential interest-rate hikes. Currently, only insured buyers with less than 20% down are subjecedt to the tests.
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According to Global News, if a family with $100,000 annual income had a 20% down payment and got a five-year fixed mortgage with 2.83% interest rate and 25-year amortization period, they could afford a home worth $726,939.
If the same family applies for a mortgage on or after January 1, they will be able to afford only $570,970, even with 20% down payment.
“Judging by the sales we saw in November and what I’ve heard from our members, some buyers have indeed accelerated their purchasing plans to avoid the stress test,” says Balabanian. “This may change the numbers we see in the early months of 2018, as some buyers who had planned to buy next year have bought a bit earlier.”
The new stress test rules won’t apply to mortgage renewals as long as they are with the borrower’s existing lender.