Canada’s bank regulators are pondering whether to change the mortgage stress test rules to make it tougher for consumers to buy a home and take some heat out of the housing market. The Office of the Superintendent of Financial Institutions (OSFI) announced that it is reconsidering the stress test that requires borrowers to qualify for uninsured loans at two percentage points above the market rate or the Bank of Canada’s five-year rate – whichever is higher. The minimum qualifying rate adds a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of some change in circumstances, such as a loss of income or a rise in interest rates.
Economic optimism and low interest rates continue to fuel home sales across the GTA. The Toronto Real Estate Board released the March stats this week, and the numbers are record breaking. There were 15,652 sales reported, surpassing the previous record set in May 2016 with 12,870 sales, and the average sale price for a home in the GTA is now $1,097,565 up 21.6% over the same period last year. The March results show home buyers are spending about $195,000 more than a year earlier and $50,000 more than February’s average, when prices pushed past the $1-million mark for the first time. It is important to remember that during the second half of March last year, sales activity dropped off dramatically when the state of emergency was declared.
As home prices continue to sky-rocket, one common practice we are seeing all across Canada is the blind bidding. When multiple buyers bid on a property, they have no idea what their competitors are offering. Many bidders aim high in hopes of beating out everyone else, driving up prices as excessive bids set new precedents for a neighbourhood.