These rules aimed to address problematic conditions observed in the market such as imbalances in the housing market with overbuilding, overvaluation, overheating and price acceleration.
It was predicted that these changes would help soften the market but affordability has stayed low while prices continue to increase. Unfortunately, since the new rules have been put into place, they have not had as positive of an impact as anticipated. Instead, the changes that occurred seem to have been negative in the exact areas they were supposed to benefit - first time home buyers and weak market areas (which have since become even weaker as sales have continued to fall in those pockets).
The most notable result from these initial changes was the fact that mortgages were harder to get and the insured housing market (those putting a down payment of less than 20%) shrank. It seems as though the effects of the changes are being covered by the stronger markets instead of addressing the initial issues.
Now, the Office of the Superintendent of Financial Institutions (OSFI) is looking to make more changes that will yet again heavily impact the market and consumers' ability to buy.
The OSFI is proposing a stress test to alternative lending sources. They will be extending bank tests to all mortgages, not just insured ones. The proposal would require lower-risk borrowers to be approved at two percent above the rate offered to them by their lender. This stress test is forecasted to depress housing demands by another 5-10% while lowering housing prices approximately 2-4% of the current average price.
This proposal is bad news for those looking to purchase a home. Homeownership is slipping out of reach for many first-time homebuyers in the housing market as a result of the shortage of affordably priced homes. Those still intent on purchasing a home may find themselves driven into less suitable housing or enticed into visiting sub-prime lenders that are not federally regulated.
Those buyers who have saved diligently for a down payment and planned their purchases properly would also face another roadblock in entering the housing market. In addition to this, those who have their own home and are looking to upgrade will be in the same boat.
With the interest rates already increasing and the pricing of homes still increasing in some areas, consumers are left in an uncomfortable position.
What are your thoughts? Do you think this will benefit the market or the buyer? Do you think this is a fair change for buyers or sellers?