New government mortgage lending rules were announced yesterday and has me wondering how others are reacting to it. Will is really make a difference? Or will it spark a real estate buying frenzy...what they are really hoping to happen in an effort to stimulate the economy?
Basically they are going to require people who want a variable rate mortgage, like the ones we have, to be able to qualify as if they are taking out a 5 year fixed rate term (usually a higher rate). This is supposed to enable them to keep affording the payments should rates go up.
I'm not convinced that it is that much harder to quality for a fixed rate vs. variable rate mortgage in the first place. But this announcement may make people who think they are on the cusp, panic and buy without thinking before these new rules come into place shortly.
The one change I feel will make a difference is with respect to income properties. Soon, purchases will require 20% down so as to deter speculators. I agree with this one.
It wasn't that long ago when the maximum length for mortgage amortization was 25. Then they started allowing longer and longer lengths of time. We in Canada no longer have 40 year amortizations but 35 years is still allowed. I still think it is too long. It is hard to feel free when you have that hanging over your head for decades.