The big news in June was the changes to mortgage lending rules announced by Jim Flaherty, Minister of Finance. Here are the highlights:
• Lowering of the maximum allowed amortization for insured mortgages from 30 years to 25 years.
• Lowering the limit when refinancing to 80% of the value of a home.
• Fixing the maximum gross debt service ratio at 39% and total debt service ratio at 44%;
• Limiting the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million
Mr. Flaherty said he wants people to be cautious.” ”Some calming of the market is desirable.” He said his changes will hit only a small number of people. “What we anticipate is less than five per cent of new home purchasers will be affected by these measures.”
While there is no doubt that this will take a number of buyers out of the market, it will create pressure on the rental market rates as now buyers who were thinking of purchasing will now go into rentals. So in fact if you own rental property, this change becomes a good thing for you!
The Toronto Real Estate Board reported 9,422 sales in June 2012, bringing the year to date total to 50,778 homes sold at an average price of $505,366. 2012 is shaping up to be a record year for sales in Toronto because the GTA housing market remains, (hard to believe) affordable! The share of the average household’s income going toward major home ownership payments for the average priced home remains near 35%, below the 39 per cent ceiling set by Mr. Flaherty.
While the majority of people pause for summer, pause to see how other people react to the changes, it is an excellent to buy! If you were considering purchasing an income property or upgrading your home or know of someone thinking of buying this year, July/August will be a great time, as there will be less competition!
If you have any questions, or know of someone who needs my expertise, give me a call, I’ll be happy to help, or just chat.
Have a great July,