What Impact will the New Mortgage Regulations Have? – Ask a Vancouver Mortgage Broker

What Impact will the New Mortgage Regulations Have?

Adil J. Virani – Vancouver Mortgage Broker

Industry insiders (including your trusted mortgage broker in Vancouver) are clamouring to determine the effects of the new mortgage regulations on the value of residential real estate.

Is this something we should be seriously concerned about? Or are the effects just another overhyped fear, set to blow over as soon as the next big piece of news comes out?

Well, home sales have fallen by about 6% during the first month with tighter restrictions on insured lending.

And word on the street is that volumes have also dropped for insured mortgage applications, even after normalizing for seasonal fluctuations. A lot of this has to do with the effects of the new regulations on the typical first time buyer.

“The broadly based decline in August sales activity suggests that some buyers may no longer qualify for a mortgage now that amortization periods for high ratio mortgages have been shortened”, says Gregory Klump, an economist with CREA.

He went on to say that changes in first time buyer activity have the potential to affect the entire market. If you are considering getting into your first home during this potentially turbulent time, you would be wise to first consult an honest Vancouver mortgage broker.

He also noted that it might be a few more months before enough data can be acquired to see the actual effect of the new changes on the housing market in Canada. More information will allow economists to, “gauge the broader impact” of the new rules.

Autumn, is the second busiest season when it comes to Vancouver home mortgages. This increased activity should allow market researchers to get a decent read on the real effects before 2013 rolls around. Waiting until December will also allow us to collect information and feedback from banks who will by then have reported their August, September and October earning results.

The first complete fiscal quarter under the new regulations will be the forth quarter of this year.

But while we wait for data, those of us in the business have a pretty good idea what tougher rules for refinancing, reduced amortization periods, and more restrictive debt ratios will do…  And it’s not spectacular for short-term home values, at least for the time being while the market shifts to a new equilibrium.

Bear in mind that long-term stability is what policy makers were after in the first place. If that means sacrificing some short-term stability than so be it, as inconvenient as that may be to potential home buyers during this phase.

Consult your Vancouver mortgage broker for more up to date information on the effects of the new changes.