Driving 'til you qualify
Driving ’til You Qualify
July 15, 2019
What Rate Do I Choose? | Walnut Grove, Langley, BC
What Rate Do I Choose?
July 30, 2019

Icebergs In July

Icebergs in July

This past week I witnessed two events.

First, the weather forecast on the west coast seemed to change by the minute which is exactly how often I checked my weather apps. I was hoping for a miracle. Okay, I secretly would have settled for temperatures above 15C.

The second event I witnessed was the announcement that the Qualifying Rate decreased, the first time since September 7, 2016. And here I was expecting to see an iceberg in July.

So, what does this decrease in the Qualifying Rate mean for existing homeowners and first-time buyers? – apparently not very much according to experts. The federally mandated Stress Test and the B-20 federal guidelines have reduced the purchasing power of homebuyers by as much as 20% since 2016. This most recent announcement all be it a positive move, will most likely make very little difference for homebuyers in markets including Vancouver, Toronto, and the suburb markets. In fact, experts have already calculated that the lower Qualifying Rate will mean an increase in home purchasing power of 1.4%

“…Almost no one saw this coming due to the stress test rate's obscure and arcane calculation method. This .15% drop in in the qualifying rate will not turn the housing market around in the hardest-hit regions, but it will be an incremental positive psychological boost for buyers. It should also counter, in some small part, what’s been the slowest lending growth in five years.”

~ Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

An increase in purchasing power of 1.4% in Walnut Grove, Langley, BC could mean that a family with a combined income of $100,000 would see additional purchasing power of $8,300.

Canada Mortgage and Housing Corporation stated in its most recent July 2019 Residential Mortgage Industry Report that Housing starts have decreased 3%, MLS sales have decreased 11.1% and the average home price has decreased 4.1%.

Homeowners are still required to navigate through a maze of complex federal mortgage lending guidelines, in many cases families are forced to continue renting at higher market rates and saving less which could be applied to a down payment.

Nothing has changed for existing home owners.

I understand the difference between leading and lag indicators in economics and that we live in a complex world that, economically, is shaped and reshaped by the minute. My only wish though is that there was a homeowner app sort of like the weather app, that our federal regulators checked on a minute-by-minute basis because if there was such an app, they would have realized that the market changed in September 2016.

Dave Fullerton
Dave Fullerton
Dave Fullerton, BA (Fin) is a Mortgage Professional in Langley, BC with Dominion Lending Centres The Professionals.