First-time buyers, single-income earners take biggest hit with new mortgage rules

New rules aimed at making it harder to get a mortgage will likely have the greatest impact on first-time buyers and single-income families.

May have to lower their expectations to buying a condo instead, mortgage broker says

Starting Monday, new mortgage will affect potential buyers who can't make a down payment of at least 20 per cent. (CBC)

New rules aimed at making it harder to get a mortgage took effect Monday, and people in the industry say the changes will likely have the greatest impact on first-time buyers and single-income families.

"People kind of stretching to get into the housing market, because money's fairly cheap to borrow, they're now going to be challenged to qualify," Edmonton realtor Patti Proctor said on Monday.

The new rules, announced by the federal government earlier this month, amount to what has been described as a "stress test."

Buyers who want a mortgage for more than 80 per cent of a home's value will be income tested to determine if they could still afford the payments if mortgage rates went up by two per cent.

Buyers who don't pass the test will be turned down, even though they don't actually have to pay the extra money.
People are putting off a house purchase until they have more of a down payment said Krishna Gupta Alberta Mortgage Centre broker (CBC)

Before the new rules, a family with an annual income of $80,000 would likely have qualified to buy a $400,000 house, said Krishna Gupta, a broker with Alberta Mortgage Centre.

Now they would likely qualify for a house priced at $320,000, he said.

"They have to lower their expectation from buying a single-family home ... to either a half-duplex or a condo," Gupta said.

Rather than do that, some people are putting off a home purchase until they have saved more for the down payment, he said.

Proctor she said she was busy over the last two weeks with buyers trying to complete purchases before the rule changed.

"It's been 25-per-cent busier for this time of year," she said.

Gupta described the current real estate market in Edmonton as "cool," but Proctor called it "stable."

"Edmonton seems to have dodged the big bullet in the single-family (housing market), condos have definitely been hit harder," Proctor said.

There are specific factors affecting the condominium market, including plenty of new building, she said.

"In general, the single-family and semi-detached homes have sold really well," said Proctor. "We haven't seen a huge drop in prices."