New mortgage rules the federal government announced this week will put a mild chill on the St. Albert housing market, but not a freeze, predict local experts.
The government announced late Wednesday it would no longer insure 30-year mortgage terms, making them largely a thing of the past effective July 9. The new rules reduce the maximum amortization period to 25 years. The change was announced along with a host of other measures designed to keep a lid on Canadian debt levels.
In a statement, Finance Minister Jim Flaherty said the move was aimed at making sure Canadians didn’t get over-extended, while still making sure they could get into home ownership.
“Investing in a home is a great way to save,” said the finance minister. “That is the dream that mortgage insurance was intended to support. The measures we are taking today maintain that intended purpose.”
The changes, which could make homeownership unattainable for some buyers, won’t have a big impact here in St. Albert, says one local realtor.
“It is just another negative little thorn in the side of real estate,” said Jill Thomas. “I don’t think it will be a big thing, I think it will be a small impact.”
Mortgage planners likewise see it as just a small bump in the road.
“We knew these changes were coming, it just didn’t exactly make my morning when it hit my email,” said mortgage planner Tara Borle.
Borle said the 30-year amortization option was helpful for many homebuyers, especially first-timers, because it eased the transition into home ownership.
“I always encourage them to take the 30-year amortization and then if they have extra money, they can pay it down to be at the 25-year amortization,” she said.
Even with that, she said she doesn’t anticipate the news will generate a big drop in the housing market.
“I don’t foresee it being a big economy stopper,” Borle said.
On a five-year fixed rate of 3.09 per cent, a 25-year amortization on a $300,000 mortgage would cost someone $1,433 per month, while a 30-year amortization would cost $1,276, Borle said.
Thomas said she doesn’t anticipate this will do much to housing prices.
“Prices are pretty soft right now and it is just unfortunate, the market is really slow and heavy,” she said.
She said it is unfortunate prices are lagging, because the local economy is still very strong and demand should be higher.
“We still have the hottest economy on the planet here and why the prices are low and slow and everything is heavy and pendulous, I don’t know.”
Along with the change on amortization, the Canadian Mortgage and Housing Corporation will only allow Canadians to borrow for up to 80 per cent of the value of their homes, down from the current 85 per cent.
The government will also no longer back mortgages with a value of more than $1 million.
