Some observers say that affordability has improved, while others argue that the easing is just a red herring
With the Bank of Canada’s five-year conventional mortgage rate falling from 4.94% to 4.79%, and the downward trend shown by major banks’ five-year rates, the slight easing of the stress test might be pointing to better times ahead for hopeful home buyers.
James Laird, president of CanWise Financial, estimated that for buyers with annual incomes of $100,000, the BoC’s rate cut would mean that they can now qualify for homes valued at $531,230, assuming a 10% down payment and a 25-year term.
Laird said that this was a marked improvement from the $523,410 level that these buyers would have qualified for in the 4.94% era.
“The Bank of Canada’s conventional 5-year mortgage rate is based on a formula, and mortgage rates are at historic lows.Therefore, it is logical for the qualifying rate to drop as well,” Laird told Yahoo Finance Canada.
But other market observers are not as convinced.
Jason Zuckerman, mortgage broker at Mortgage Architects, said that the new rate did not essentially change the plight of a significant number of would-be buyers.
“The shift from 4.94% to 4.79% will not make someone who can’t afford to buy a house, now be able to buy a house,” Zuckerman said.“The issue here is that it hurts first-time home buyers who are already struggling with increasing home prices. It just creates an extra hurdle for them to get into the market.”
