Sask. realtors: New mortgage rules can hurt first-time homebuyers

There is some bitter news for people looking to buy a home in Canada after Ottawa announced sweeping changes to how Canadians get a mortgage.

In the wake of what's been a ballooning consumer-debt situation in Canada, this week the federal government introduced new rules around real estate, tightening mortgage requirements.

• Ottawa tightens mortgage requirements and targets foreign money
• Canadian house prices still rising, but at slowest annual pace since January 2015

Bill Madder is the CEO of the Association of Saskatchewan Realtors. He characterized this announcement as Ottawa and the Canadian Mortgage and Housing Corporation's way of protecting against a spike in interest rates and a potential problem down the road.

How this affects first-time homebuyers

"Typical first-time buyer with about $50,000 per year income and a five per cent down payment, under the old rules they would've qualified for $302,000 purchase," Madder said.

"Under the new rules, they qualify for $239,000, so there's a significant reduction in the amount of mortgage available and with their down payment the value of the house they can buy."

We're concerned how this might affect the first-time homebuyer market.- Bill Madder, realtor

Another significant factor, Madder said, applies to anyone putting down less than a 20 per cent down payment on a mortgage; they'll have to qualify for a mortgage at a higher interest rate. This means a person's income would have to support payment at a higher amount even though they can choose to take out the mortgage at the lower rate and make lower payments. 

"The new qualifying rate is 4.64 per cent whereas a number of banks were offering 2.25 per cent — so there's a significant reduction on a mortgage that's available to them," he said, adding that depending on the applicant and the property, the bank may also require mortgage insurance.

And while this will help simmer the hot housing markets of the likes of Vancouver and Toronto, this may have ill effects on the Prairies.

"The concern we have is that the areas of Saskatoon, Regina and smaller communities throughout Saskatchewan, there really isn't a large bubble here … Our marketplace is very different from the rest of the country and we would have concerns with the federal government trying to sort of use a one-size-fits-all solution."

The new rules will likely have an impact on the entry-level homebuyers, Madder said, as the higher down payment could mean a few more years of saving before moving into a first home.

"I don't think this will affect sales greatly, but it may be a deterrent for some people that are just getting started," he said. "We're concerned how this might affect the first-time homebuyer market."