Despite many media reports, people are still buying and selling homes in Mississauga. In November, compared to last November, the MLS Home Price Index composite benchmark was up 8.4 percent, compared to last November. In October as well, compared to last October, the MLS Home Price Index composite benchmark was up 9.7 per cent.
Every year, the real estate market tends to be more active in the early fall, compared to the late fall; activity tends to wane as we approach the holiday season. However this year, the number of transactions in November was actually up, compared to October. As well, the number of new homes for sale across the GTA on the MLS increased this November, compared to last November. At the same time, the demand for housing at this time seems to be high. This may be due to the fact that some potential home buyers are purchasing now, before the new stress test takes effect in January, and their purchasing power decreases.
And while the GTA housing market has been impacted by a number of policy changes at the provincial and federal levels, it appears that the psychological impact is starting to unwind. This is an expected evolution.
As mentioned above, starting in January 1, 2018, Canadians won’t be able to qualify for as large of a mortgage. This new “mortgage stress test” will effectively reduce the size of the mortgage Canadians are able to take on. Canada’s banking regulator introduced the new rules that extended the requirement for a mortgage stress test to ALL homebuyers, including those with larger down payments. (Previously, the stress test applied only to mortgages with lower down payments and those with a term of less than five years.)
The new minimum qualifying rate that has been introduced by the Office of the Superintendent of Financial Institutions (OSFI) is even for uninsured mortgages, which have down payments of 20 per cent or more, and applies to new mortgages as well as mortgage renewals if borrowers switch lenders.
The new guidelines now require federally regulated financial institutions to vet applicants for uninsured mortgages by using a minimum qualifying rate equal to the greater of the Bank of Canada’s five-year benchmark rate (currently 4.89%) or their contractual rate plus 2 percentage points. Furthermore, if the client wants a variable rate (currently at 2.70%), they will need to qualify using the benchmark rate (currently 4.89%). Clients who purchased and obtained approval after January 1, 2018 are processed under the new rules.
Let’s look at an example. Previously, a family with $100,000 gross taxable income can qualify for a purchase price around $685,000, if they put a 20% down payment and take a five-year fixed rate. After January 1, 2018, their maximum purchase price is closer to $550,000, as the new qualifying rate is much higher.
The regulatory regime states that these changes are a result of the confluence of high household debt, and high real estate prices, and low interest rates in Canada.
If you have any further questions about the current state of the Mississauga real estate market, please call Sam McDadi Real Estate at 905-502-1500. We would be happy to answer all your questions.