Buying a new home is already a stressful experience. With last year’s introduction of a mortgage stress test for all aspiring homeowners, that has only become more so. There are several requirements to meet before a successful application, and the aspiring homeowner must be sure they will be able to meet the monthly payments before applying.
“I think the policymakers will be pleased to the slowing growth in home prices and the delinquency rates are quite low as well,” said James Laird, president of Toronto-based CanWise Financial. “At a high level, generally speaking it has achieved what it was designed to achieve.” Rules around the stress test apply to the lenders, where they are required to further scrutinize the loan-to-value ratio of the mortgage to make sure the mortgages are not too large compared to the value of the home.
“Banks are motivated to keep 5-year posted rates high for their own economic self-interest, largely because it earns them more prepayment penalty revenue,” said McLister. “A fairer stress test would be the 5-year Canadian bond yield plus 300 to 350 basis points.”“What that does is, increases affordability by about 10 per cent,” said Laird. “What I really like about that is on a month-to-month basis a household isn’t paying any more they’re just paying for a little longer period of time.
Get rid of it!!!!
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