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What do Canada’s new mortgage rules mean for you?

What do Canada’s new mortgage rules mean for you?

Posted on: October 17, 2016
Author: Lana Cuthbertson

The federal government has made some changes to Canada’s mortgage rules. Planning to buy a house or condo sometime soon? Here’s a breakdown of how the new rules might affect you.

If you have made plans based on a certain interest rate, you’ll now also have to qualify for a mortgage at an interest rate that may be higher than the rate you’d actually get from your financial institution. Potential homebuyers now have to qualify for a mortgage based on the Bank of Canada’s mortgage interest rate or contract rate, whichever is higher. Currently the Bank of Canada’s applicable rate is about 2 per cent higher than the mortgage rate most people pay for a fixed rate 5 year term.

This is to protect you in case rates do increase and your payments then go up—the rule is in place to make sure you can make those higher payments.

“Based on our experience, the majority of our customers do not seek mortgages that maximize their debt servicing capabilities and may not be impacted,” said Sundar Ramanathan, managing director of product portfolio management at ATB Financial.

“However this new mortgage rate stress test, as it’s being called, will have a direct impact on the maximum mortgage amount Albertans qualify for. It could mean the maximum mortgage amount someone qualifies for decreases. The impact will vary depending on income, savings for down payment and other monthly obligations. If you are in doubt, the best advice is to reach out to your personal banker and assess the maximum mortgage you are eligible for.”

Rob Bennett, ATB’s executive vice-president of Retail Financial Services, said the federal government’s moves give him another chance to tell ATB’s story of being different in the mortgage space.

“All mortgage customers of whatever financial institution need to make sure they’re not getting an inflated rate, that there’s no difference between their posted rate and the contract rate, and that they understand how the industry practice of so-called discount pricing can actually neutralize a drop in the posted rate,” said Bennett.

“At ATB there’s no inflated rate, there’s no difference between the posted rate and the contract rate, and we don’t use that practice.”

This new rule doesn’t impact current homeowners who already have mortgages, even if they may be up for renewal.

More information on the changes is available here. If you have questions—any of our personal bankers can help walk you through what this means.

*That’s Rob in the pic at the top of the page explaining how he got rid of the interest rate differential in ATB’s No Bull Mortgage. Not pictured: how he really got rolling talking about the discount pricing “practice.” Rob thinks all customers should ask their banks a few more questions about the shape of their mortgages! Or email him: rbennett@atb.com

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