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My Mortgage Blog

Canadians now have more mortgage debt than they have ever had in history. Combine that with the news of increasing housing costs and a recent survey that indicates that more than 70% of people who want to purchase a home fear they will never be able to afford one. If people are worried for themselves, they are even more worried for their children's chances of homeownership. It's not a surprise then that housing affordability is a major talking point for each of the three most popular political parties. Each party has promised better housing affordability in the lead-up to the federal election set for September 20, 2021.

What are some of the promises, and how could they affect homebuyers? We will discuss a few of them here.

Creating More Homes

In some parts of the county, demand for homes is simply outstripping the supply. The shortage is one of the most significant factors driving the increase in house prices in markets like Toronto and Vancouver. The Conservatives, Liberals, and NPD promise to create more than 1 million new homes over the next 3 to 10 years. 

Since the government is not likely to get into the construction business, the new homes will likely come in the form of transfers to the provinces to subsidize housing builds or tax incentives for building in strategic areas. With more homes available to meet the demand, housing prices would be expected to stabilize, making it easier to find homes at prices buyers can afford.

The Foreign Ownership Concern

Each of the three parties promises to address the issue of ownership by people who do not live in the country. These investments often sit empty for long periods. The perception is that foreign buyers help drive up the cost of housing by increasing demand and scooping up homes that people in the country need. 

The Liberals and Conservatives promise to ban foreign ownership for two years. Meanwhile, the NPD would deter foreign buyers by implementing a 20% tax. Whether ban or tax, there remains some debate about whether foreign ownership has as much impact on prices and supply as reported.

Levelling the Playing Field for Buyers and Sellers

Recent home buyers will tell you that the experience can be a trying one. Bidding wars, bully offers, personal pleas and other tactics are common. Sellers induce bidding wars and ask buyers to forego viewings and home inspections. In response, the Liberal party promises to create a homebuyers bill of rights and making the practice of blind bidding illegal. 

Tweaking Mortgage Rules

Recent changes to the mortgage stress test and tightening of credit score requirements have made getting mortgage approval more difficult. However, the Conservatives and NDP are promising to make things better.

Less Reliance on the Mortgage Stress Test 

The Conservatives have promised that they would reduce the use of the stress test, allowing more buyers to qualify for larger mortgage amounts. 

Encouraging 10-Year Mortgage Terms

The Conservatives also promise to encourage lenders and buyers to consider longer mortgage terms. Seven or 10-year terms with fixed mortgage rates offer greater stability for longer. With historically low rates and a preference for less risk, longer-term options may be a good option for some home buyers.

The Option for Longer Amortization

The CMHC currently limits the amortization to 25 years for high-ratio mortgages, which limits the ability of younger, first-time homeowners to afford mortgage payments. The NDP promises that if elected, they would reinstate 30-year amortization for first-time home buyers. Longer amortization means payments can be affordable for new home buyers, or they can borrow more to purchase the home they want. 

Canadian homeowners and affordable housing advocates have been sounding the alarm for some time about the prospects of homeownership now and in the future. Obviously, the politicians are listening and hope to win your vote with their promises of easier times ahead. Which party will win and which promises will make it to fruition still remains to be seen. 

Whatever happens, we'll be here, watching for the changes and assessing the possible effects on you and your mortgage. Get in touch with us to discuss mortgage rates and options, whether you are a first-time buyer, looking to renew, or make a move. We are here to help find the best mortgage rates in Niagara Falls