By: Kylie Vaillancourt
New mortgage rules coming into effect Monday might make buying a house in the future a struggle, especially for first-time home buyers.
Mortgage applicants will have to undergo a “stress test,” which will evaluate an individual’s ability to make payments at a higher interest rates.
The test was already in place for some types of mortgages but it will now be applied to all insured mortgages where a buyer’s down payment was less than 20 per cent of the purchase price as well as fixed-rate ones. It helps determine if someone can still afford their mortgage if the interest rates were to go up or other financial situations were to occur.
The new rules are likely to affect first time home buyers and some current homeowners.
“I think it’ll put a little bit of pressure on first time buyers which will possibly cool the [housing] market very slightly,” said Peter Majthenyi, a broker/agent at My Mortgage Planner.
Majthenyi that the new rules could have a small impact on millennials buying a house in the next couple years. He said anyone buying a house in the future will likely carry less debt than people today.
Justin Barber, 20, a third-year business administration student at Guelph-Humber, said the current housing market and rising mortgage rates, makes it difficult think about buying a house after graduation.
“As college students, we aren’t exactly the most well off financially, and with mortgage rates potentially going up to close to 5% in the near future, it’s a difficult time to not only raise enough capital to go to a bank and apply for a mortgage, but even to buy housing past the mortgage stage,” said Barber.
Creative Photography student Olivia Daniels-Brown, 19, said she has a lot to learn about the housing market. She was never told or taught anything about buying a home.
“I think there should be a class for it in high school because high school is supposed to prepare you for the future,” said Daniels-Brown.
There’s a variety services online like ratehub.ca that provides help and guidance for those who plan on buying a home for the first time.