(excerpted from cbc.ca Oct 5/2016)

“As of Oct. 17, more mortgage applications will undergo a “stress test” to evaluate a borrower’s ability to make mortgage payments at a higher interest rate.

The requirement was already in place for some types of mortgages. It will now apply to all insured mortgages, including fixed-rate ones with terms of five years or more.

“This is a dramatic change,” David Larock, president of Integrated Mortgage Planners, said in an interview with CBC News.

Larock expects it to bring about higher mortgage rates as lenders apply a “much tougher filter to all of their mortgages.”

For borrowers, Larock says that will translate into an 18 per cent drop in what they’ll be able to afford after Oct. 17.

According to his calculations, someone with an annual income of $80,000 and a $40,000 down payment — an “average first-time buyer” — currently has a maximum purchase price of $520,000. But after Oct. 17, Larock says that would drop to $425,000.

Housing prices in the Toronto area continue to soar, with the average price in September rising 20.4 per cent to $755,755.

The number of sales also jumped 21.5 per cent, according to figures released this morning by the Toronto Real Estate Board.

It says there was strong sales growth for all major home types but a lack of supply limited growth in the City of Toronto itself.

Adjusting for price differences between types of housing, a benchmark price index was up 18 per cent from September 2015.

The average sale price for detached houses in Toronto proper rose to $1.29 million, up 23 per cent from a year earlier. The comparable price for detached houses in surrounding areas was $928,414, up 26.6 per cent.

By contrast, prices for condos in Toronto proper grew only 6.5 per cent to $446,729. Condo prices in other parts of the Greater Toronto Area were up 19.4 per cent to $367,260.”

So what does it all mean?

Not great news for new purchasers, not much of an affect on investors. If anything, the lack of qualified independent purchasers will be welcomed by investors – less competition at price wars and a continued pool of fairly high income renters to offset their carrying costs.

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