Like many homeowners, Sarbjit Kaur has been riding the knife edge of record low mortgage rates for well over a year, waiting for the right time to lock in as cheaply as possible for a longer term.

 

And for good reason. Experts warn rates are creeping up as bond markets react to concerns about high international debt levels and expectations the Bank of Canada will raise rates soon to quell inflation as the economy improves.

 

 

“The big question is where will mortgage rates be in five years and what could my payment be then?” says Kevin Moffatt, vice-president and mobile mortgage specialist with TD Canada Trust.

 

 

Another issue facing buyers is the new mortgage qualification rules designed by the federal government to cool the housing market and make home shoppers more realistic about what they can afford.

 

 

Taking effect Monday, April 19, the rules set tougher criteria for lenders assessing a borrower’s ability to carry loans insured by the Canada Mortgage and Housing Corporation, in cases where the down payment is below 20 per cent of a home’s price.

 

 

The new standard is the ability to repay the five-year fixed mortgage rate, now posted at 5.85 per cent, instead of the three-year rate, now at 4.35 per cent, meaning many buyers will need higher incomes, larger down payments or have to opt for cheaper properties. As a rule of thumb, banks say mortgage payments shouldn’t exceed one-third of a family’s gross income.

 

 

Like many homeowners, Sarbjit Kaur has been riding the knife edge of record low mortgage rates for well over a year, waiting for the right time to lock in as cheaply as possible for a longer term.

 

 

And for good reason. Experts warn rates are creeping up as bond markets react to concerns about high international debt levels and expectations the Bank of Canada will raise rates soon to quell inflation as the economy improves.

 

 

“The big question is where will mortgage rates be in five years and what could my payment be then?” says Kevin Moffatt, vice-president and mobile mortgage specialist with TD Canada Trust.

 

 

Another issue facing buyers is the new mortgage qualification rules designed by the federal government to cool the housing market and make home shoppers more realistic about what they can afford.

 

 

Taking effect Monday, April 19, the rules set tougher criteria for lenders assessing a borrower’s ability to carry loans insured by the Canada Mortgage and Housing Corporation, in cases where the down payment is below 20 per cent of a home’s price.

 

 

The new standard is the ability to repay the five-year fixed mortgage rate, now posted at 5.85 per cent, instead of the three-year rate, now at 4.35 per cent, meaning many buyers will need higher incomes, larger down payments or have to opt for cheaper properties. As a rule of thumb, banks say mortgage payments shouldn’t exceed one-third of a family’s gross income.

 

Full Toronto Star Article