We have just completed the first 4 months post stress test! The new stress test requires that mortgage applications qualify using income from the tax returns using a rate that is 2% above the actual interest rate.
During May we will see how this new stress test will impact the real estate market under these new rules, as any applications approved before Dec. 31, 2017 were approved using the old rules, and the rate holds were good up to April 30th 2018. The month of May will represent the first month with all applications undergoing the new rules.
Unfortunately the interest rates are on the rise! The Bank of Canada has a mandate to take Canadian interest rates back to “normal”, meaning a prime rate that is 4.5-5% over the next 2-3 years. Currently our prime rate is 3.45% so that means we are potentially going to see 1.55% increase in interest rates if the Bank of Canada follows through with the current mandate. We are expecting 2-3 Bank of Canada increases during 2018 depending on how the Canadian economy performs. February GDP showed an increase of growth of .4% which is higher than the expect.
