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New Mortgage Rules to Affect First-Time Home Buyers

First-time buyers save as much as they can so that they can put down a fair amount as a down payment for their dream home and secure a mortgage for the rest of its value. A larger down payment also means a lower monthly payment, as well as saving on part of the interest (for the amount they choose not to avail as part of the mortgage).


Things are changing. According to the new rules, which comes into effect from October 17, they would qualify for 18-25% less than what they do now. For instance, someone who had an annual income of $50,000 would normally qualify for $300,000, but under the new law, announced by Finance Minister Bill Morneau, the same person would be eligible for only $240,000. These changes are to ensure that buyers will still be able to make the monthly payments should interest rates increase in the future.


In Edmonton, the average detached home sells for $397,500. Considering a figure of $400,000, somebody interested would have to be making $80,000 per year or have a household income that equals this amount. Under the existing structure, he/she would need to have an annual income of only $65,000.


Michael Thompson of the Realtors Association of Edmonton is of the opinion that how it all works out remains to be seen.


There might be several who make $65,000 a year, but fewer who earn $80,000 or more. This effectively means that single people or single-income households would have to look at cheaper homes. This would affect the middle range of the market. However, as demand for lower-priced homes increases following the new rules coming into effect, that would cause mid-priced home sales to dip. Together, these two would result in low-priced homes becoming more expensive and mid-priced homes being sold for less than what they command now. The average home price would then fall, making homes generally more affordable. This is another objective that the federal government hopes to achieve. The average price of a detached home in Toronto is already upwards of $1 million. In Vancouver, it is $1.53 million.

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