New mortgage rules that took effect on Monday will likely mean many millennials will have to raise infants in apartments, says a Toronto financial planner.

Shannon Lee Simmons, a certified financial planner at the New School of Finance in Toronto, told CBC's Metro Morning on Monday that many millennials hoping to buy their first homes may have to rent for a little longer, maybe even three to five years.

"We are all going to be raising babies in apartments. That's what it's going to come down to," Simmons said.

Her advice to millennials, of which she is one, is accept their plight, don't overdo it on rent, stay in an apartment with affordable rent for three to five years, start your family, pay for day care and come out the other side with savings.

"Accept your fate a little bit," she said.

"You may feel like you are sacrificing a lot. This isn't where you saw yourself. I get it. I'm in the same boat myself. However, we're going to be that much better off five years from now from renting. An infant doesn't care if they are in an apartment. We care if they are in an apartment. But an infant doesn't care."

The new rules boil down to a stress test for all insured mortgage applications. That means a test to determine if a borrower could afford to pay back a loan if the rate was higher, so a borrower will be judged against the five-year standard rate of 4.64 per cent for a five-year loan, even though many lenders are currently offering mortgages at far less than that.

Previously, that test was only used on certain segments of the market. But starting on Monday, it will be in place for any insured mortgage for a buyer putting down less than 20 per cent of the home up front.

Simmons said the new rules essentially mean most people will qualify for less money. The rules are designed to ensure Canadians don't assume mortgage debt they cannot manage if interest rates rise once they need to renew.

"It's for the greater good," she said. "I used to do this with my clients all the time. But now it's enforced and mandatory, so it does take some choice out and I think it's going to affect first-time homebuyers."

Simmons said the new rules will affect first-time buyers because it's hard to raise a 20 per cent down payment, and it will have an impact on bidding wars because buyers will not be able to bid as much as they want.

The rule changes will mean millennials who want to buy homes will have to save money, by spending less or making more, while they rent, she said.

Overall, she said, they could mean a change of plans.

"I'm a bit gutted for them, although I agree with this on a philosophical level," she said.

"It's tough already. Some of my clients were planning on taking the plunge this year. Now, they feel like: 'What's the point of trying because I can't even save at the same rate that the house prices are going up. It's going to take me that much longer now,'" she said.

"Now, I think that there's frustration and it feels like the dream of home ownership gets farther and farther away."

Simmons said the hot housing market has affected the rental market as well because landlords have increased rents for larger apartments, knowing that people cannot afford to buy but want more space. When it comes time to start a family, she said it means struggling with high rents while not being able to move to bigger homes.

"Now you have a whole bunch of people who feel they cannot move forward," she said.

But if work becomes decentralized, then she said millennials will be able to work from home and won't need houses in big urban centres anyway.

"That's the millennial dream," she said.