TORONTO – Canadian mortgage brokers say they’re seeing a flurry of borrowers trying to pre-empt new federal rules that take effect Monday that will reduce the purchasing power of some first-time homebuyers.
“It’s crazy today,” Matthew McKillen, a Toronto-based broker with Mortgage Architects, said Friday.
“The national loan origination software that we use to submit mortgages to our lender partners was down for a period of time due to the increased activity.”
McKillen estimates that he was 30 to 40 per cent busier this week than during a normal week.
“Our lending partners are extremely busy. Most brokers that I know are extremely busy.”
Beginning Monday, all insured mortgage applications will be subject to a stress test to ensure that the borrower will still be able to service their loan in the event their situation changes or interest rates rise. Previously, stress tests were not required for fixed-rate mortgages longer than five years.
The federal government said it introduced the change in an attempt to stabilize the country’s housing markets, particularly in cities such as Toronto and Vancouver where prices have soared and concerns have arisen that borrowers are stretched too thin.
Gregory Klump, the chief economist of the Canadian Real Estate Association, said that although the changes apply nationally, they will have the biggest impact on markets where there is a shortage of supply, particularly in the lower price range.
In more balanced markets, people whose purchasing power is reduced can simply buy cheaper homes, he said. But in Toronto and Vancouver, there may not be any homes available at a lower price point, leaving those potential buyers priced out of the market.
Rob McLister, the founder of RateSpy.com, says the brokers he talks to are reporting anywhere from a 35 to 150 per cent boost in business ahead of the new rules.
“Clearly, consumers are reading the headlines about how this is going to reduce their purchasing power, and a lot of the folks are getting off the bench and acting,” he says.
“Most of the people are buyers that already planned to buy.”
Steve Pipkey of Spin Mortgage says his sense is that the rush of borrowers is more of a phenomenon in Toronto than in Vancouver. That’s because the market in Vancouver has started to run out of steam, he says.
“The government made the time frame from announcement to implementation very tight, which is really what prevented more of a rush of buyers,” Pipkey said in an email.
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Note to readers: This is a corrected story. A previous version said the rules took effect Friday. They take effect Monday