The feds have announced major changes to mortgage rules that will impact first time home buyers in Prince George.
Borrowers will now have to prove they can afford the big banks forecast five year mortgage rates (currently 4.64%). Right now, borrowers are tested against current rates – which sit at 2.17%.
Local Mortgage Broker Michelle McCullough says that will likely change what kind of home you can afford.
“Say somebody has a salary of $50k, with no other debt. Right now, they would be able to afford a maximum purchase price of $300k. With this new change, if they only have 5% down, they would only be able to afford $245k.”
McCullough says the changes were probably needed in overheated markets such as Vancouver and Kelowna, but not so much in the north.
“I think what they are concerned about is people are still going to their max purchase price based on these low rates. What’s going to happen when rates are up 5%, are they still going to be able to afford their home?”
“They are making it a bit of a buffer”
She says first time buyers will have to choose between a more affordable home, or putting more money down – which can prove to be a challenge even in Prince George where the average price of a home is sitting around $300,000.
The changes formally come into effect on October 17th, anyone who already has a mortgage or has applied for mortgage insurance is exempt.