The mortgage stress test began with the best of intentions. In October 2016, interest rates had been hovering at historic lows for the better part of a decade. Real estate prices were rising, and household debt grew and grew. Very real concerns arose about Canadians biting off more mortgage than they could chew, should interest rates increase, even a fraction of a percentage point.
The Office of the Superintendent of Financial Institutions (OSFI) implemented the mortgage stress test to borrowers with a down payment of less than 20 per cent of the purchase price. The initiative was then expanded to include all mortgages as of January 2018.
A year later, it appears that the stress test has successfully put the brakes on the unprecedented price growth occurring in some of Canada’s largest housing markets. Balance has returned with sustainable, single-digit price growth projected across the country. This begs the question – is the stress test still necessary? For first-time homebuyers who are most burdened by the mortgage stress test, the answer is “no.”
I am 100 per cent supportive of measures that help ensure Canadians are being responsible with the amount of debt they take on – but let’s be realistic. The economy has started to soften, and economists predict the Bank of Canada will hold interest rates through 2020. Any movement, they say, will be downward – not up. In light of this new reality, requiring homebuyers to qualify at a higher rate is simply unnecessary. Particularly with the housing affordability crisis in many of Canada’s largest urban centres, young first-time buyers need a break and they need it now.
Beyond the first-time buyers who have been hardest hit by the stress test, there’s a domino effect happening. The rental market is in a frenzy, since those who no longer qualify for a mortgage are forced to rent. On the flip side, those who currently own a starter home with hopes of selling and moving up the property ladder, are unable to find buyers, since 10 per cent of buyers no longer qualify for a mortgage.
Let’s look at some more facts. Canadian real estate continues to be one of the safest and most reliable financial investments – and the desire for home ownership here is strong. Recent research conducted by Leger on behalf of RE/MAX shows that there are two main reasons Canadian Millennials want to own a home: it’s a good investment (30%) and it’s a good plan for their future (41%). They’re right.
OFSI mortgage stress test is currently a major obstacle in what’s become an elusive dream.
"The Canadian government needs to incentivise homebuyers in Canada rather than penalize them – which is what the mortgage stress test is doing."
No one is suggesting that Canadians should purchase homes they cannot afford, but the stress test in its current form isn’t solving the housing affordability issues in our country.
As we look toward October’s election, it’s even more crucial to consider how government intervention will help or hinder Canada’s housing market for the remainder of 2019 and beyond. Certainly, housing is one of the most important issues facing Canada. Between the Liberals’ renewed focus on making housing more affordable for Millennials, the NDP’s recently defeated proposed measures to increase supply with 500,000 new affordable units over the next decade, and the Conservatives sympathizing with Canadians about a so-called housing crisis – it’s clear that they’re just as uncertain about the market as Canadian homebuyers are. I propose that this quandary around housing affordability needs to be addressed head on, rather than encouraging a ‘wait and see’ approach.
The Canadian government needs to incentivise homebuyers in Canada rather than penalize them. Other problems, such as affordability, are starting to manifest in negative and preventable ways.
Let’s not wait to make some crucial changes.
Buying and selling homes is big business. It pays to do some “home work” to find a real estate agent who knows his or her stuff – literally, it pays. An experienced agent with a track record will go a long way to get you top dollar on your property sale, and the best deal on your purchase.
Treat your vetting process like a job interview. Ask questions, and don’t settle until you’re satisfied with the answers. 7 key questions to ask a prospective real estate agent.
1. What is your area of focus?
By “area” we mean city or neighbourhood, but also the type of property: condo or detached, recreational, luxury, investment, fixer-upper or brand new. Also, some agents specialize in sales while others focus on purchases or rentals. Just like in medicine, a general practitioner can probably handle a typical transaction, but there are specialists who may be better equipped to help you seal the deal.
2. Are you a full-time real estate agent?
Someone dabbling in the business part-time to make some extra money might lack the knowledge and the time required to market and show your property, and to negotiate the best deal on your behalf.
3. How many other clients are you currently working with?
If it’s a high number, question whether the agent will have the time to devote to you and your needs. On the flip-side, if the answer is zero, that could be a red flag that this particular agent may not have the experience or level of success that you’re looking for.
4. Do you have references?
Ask for a few names and numbers of past clients, and call them to help determine if the agent is worth the commission they charge. This leads us to the next question…
5. How do you get paid?
There’s no set commission rate for real estate agents in Canada, but typically these range between three and six per cent of the sale price. On a $500,000 home, that’s between $15,000 and $30,000. And remember, cheaper isn’t necessarily better. A cut-rate agent may also fall short in the service department. On the flip side, you may be able to negotiate this fee, so it’s definitely a discussion point.
6. How will you market my home?
That ‘For Sale’ sign on the front lawn is great and all, but it just scratches the surface when it comes to selling strategies. Will the home be listed on the Multiple Listings System? What about social media marketing, like Facebook? Online virtual tours? Print advertising, like newspaper ads or flyers? Open houses? The more eyes see your property for sale, the better.
7. What’s your sold-to-list-price ratio?
This number will tell you how close the agent has come to asking price. Aim high on this one, folks!
A home is likely the most significant financial transaction you’ll make in your lifetime. Finding the right real estate agent will go a long way to making it a smooth and successful one.
FEBRUARY 2019 STATISTICS RELEASE
The following is the March Press Release from the Fort McMurray Real Estate Board.
Statistics include Fort McMurray and surrounding area
We have finished out the second month of 2019 and we continue to see positive trend within our market. The number of single family homes sold in February was up when to compared to February of last year. However, the number of active listings on the market has started to climb. We have seen an increase of just over 1% when compared to February of last year. We are looking forward to a busy spring market.
Contact your friendly neighborhood real estate professional to see if it is the right time for you to make your move.
As always the best advice is the trusted advice from your Real Estate Professional.
Complete statistics are posted monthly on our website www.fmreb.com.
It’s no secret that some housing markets have gone wild in Canada – namely Greater Toronto and Vancouver, where demand for homes continues to rise with prices in lockstep, while supply is dwindling.
Recent measures aimed at cooling these hot housing markets seem to be having their desired effect – including new mortgage rules, Premiere Wynne’s 16-point Fair Housing Plan in Ontario, and Vancouver’s foreign buyer’s tax.
Despite signs of markets cooling, homebuyers are hot to trot when it comes to snagging their dream home.
A recent home-buying survey by TD reveals that 60 per cent of respondents are willing to go over budget if it means getting their foot in the door. In fact, 56 per cent would up their spend by as much as $50,000. That’s no chump change.
“A recent home-buying survey by TD reveals that 60 per cent of respondents are willing to go over budget if it means getting their foot in the door. In fact, 56 per cent would up their spend by as much as $50,000. That’s no chump change.”
“Emotions are playing too big of a role in the home buying process and are tempting buyers to spend more than they can afford,” says Roy D’Souza, associate vice-president, Real Estate Secured Lending at TD Canada Trust. “$50,000 might lose its sticker-shock compared to the overall price of a house, but it’s still a substantial amount of money that could be used to meet other financial needs… Keeping your feelings in check is critical to making objective decisions that match your short- and long-term financial plans.”
When you’re ready, we’re here to help. It’s important to be honest and up front about your budget with your real estate agent. This will arm them with the knowledge they need to ensure they can negotiate on your behalf, without going to high, and also present you options that will fall in your range, no matter what the market conditions are like.
Hi, my name is Dana McAroe. I'm a Real Estate Agent in Fort McMurray. I help people get the best possible outcome from their real estate transaction - whether they are selling or buying or a house.