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The Storey Team : Toronto Real Estate

New Mortgage Regulations Spark Change

07 October 2016
Tom Storey

If you're a canadian resident and have been anywhere on the internet or picked up a newspaper, chances are you heard the major announcement this week

That’s right; you guessed it, FIFA 2017 is now available on XBOX One and PlayStation 4 and it’s taking the world by storm.

However, if you live an actual life you were probably focused on the federal government’s mid-week announcement that they would be implementing significant changes for lenders along with “Closing the Tax-Loophole” for foreign investors. While the decision came as a surprise to some, action from government due to the rapid pace of Ontario’s real estate market was somewhat inevitable.

While this was certainly a move which was an attempt to slow down the torrent pace of markets like Toronto, let’s push all of that conversation aside and talk about what we think this means for you the consumer:


1. It just became a lot harder as a first time homebuyer.

Borrowers are now going to be subject to a “Stress Test”. This means that lenders will now be required to ensure that any mortgagee securing a loan after October 17th, 2016 must be able to handle the banks posted “5-Year Fixed Rate”. Generally speaking, this means if you can’t currently handle a mortgage at +/- 4.64%, no mortgage for you!

2. The buyer pool just thinned, but it’s still strong.

Expect a rush up until Oct 17th. There will be a ton of buyers looking to secure mortgages under the old guidelines. After that, expect the buyer pool to moderately thin out (Experts predict a 10-15% decrease). The implication of the inability for foreign buyers to avoid capital gains tax is that it will deter a lot of new foreign entry into the market. Between the impacts of the regulations imposed on domestic lending and the closing of the “tax-loophole”, we anticipate that this will moderately decrease overall consumer demand.

3. Expect a slow-down, but not a drop-off!

If you’ve been watching our monthly editions of “The Story Report”, you will have realized by now that one of the major driving factors relative to pricing in the Toronto real estate market is the lack of supply. While this remains true, we expect the decrease in the buyer pool to cause a moderate slow down in year-over-year (YoY) price increases. This means less people in bidding wars over the minimal supply that currently exists in the GTA. The reason we don’t predict a complete correction is that Supply is likely to stay low. One of the main reasons people are hesitant to list their homes is the worry that they won’t be able to find a new home before their current sale closes. In the short term this will likely continue to be the case and ultimately, should result in a more gradual overall change as opposed to a complete “shock” to the market.

To summarize, if you are in the process of looking for a home where you require financing, we recommend talking to a qualified mortgage broker (especially if you have less than a 20% down-payment) so that you can fully understand how the new policies relate specifically to you. As a great man once said,

“Opportunity exists around every corner” – Cam Woolfrey


There is still a lot of upside to looking at real estate and we actually think this has created a unique opportunity for buyers unaffected by the new changes. Look beyond the headlines, educate yourself, hire a good agent, and if you have any questions, or would like to discuss further please do not hesitate to reach out to Tom or myself.

The Breakdown in Numbers