Tightened mortgage rules will make accessing St. Albert’s housing market even more difficult for first-time buyers.
As of Monday all insured mortgages have to undergo a stress test to determine whether borrowers would still be able to make their payments if unforeseen circumstances, such job loss or an increase to interest rates, were to arise.
The change was designed to cool overheated markets like Toronto and Vancouver, as well as decrease debt loads across the country. Realtors Association of Edmonton president Steve Sedgwick believes there wasn’t enough consideration on how the move would effect a relatively stable market like Edmonton’s.
“There’s no such thing as a national weather forecast,” said Sedgwick. “Why would there be a national housing forecast?”
While he said it’s impossible to know how the new rules will affect the region’s housing market long-term, the most immediate effects will be detrimental.
Though the Edmonton region housing market finds itself in a stable position, there has been a decrease in overall sales by about 15 per cent this quarter.
Pricing first-time buyers out of the market will put downward pressure on prices, which up until now have remained consistent, said Sedgwick.
“One will lead to the adjustment of the other. When you see a diminishing of the buyers’ market this influences a downward price trend,” he said.
Sue Monson, chair of the UDI St. Albert committee and regional manager for Melcor, said the new stress tests would especially harm St. Albert first-time buyers’ market, given that the starter market is very small and more expensive compared to the rest of the Edmonton region.
The city is currently trying to expand its offerings to attract first-time buyers and younger families.
The new rules could have a positive effect on condo absorption. Condominiums are often slower to sell, but with first-time buyers searching at lower price points that could change.
Representatives of the Realtors Association of Edmonton were in Ottawa this week during the Canadian Real Estate Association’s political action days. They used the opportunity to voice their concerns over the changes.
“It’s a pipe dream to think they’ll repeal the changes,” said Sedgwick, “but perhaps there will be more stakeholder engagement before future decisions.”
The changes build on steps undertaken last year, when the federal government increased the minimum down payments on mortgages.
High-ratio insurance, where homebuyers make a down payment of less than 20 per cent, will be the first to be impacted. Changes to low-ration insured mortgages will come into effect in November.
