BY BILL PHILLIPS
New ‘stress test’ rules for mortgages may impact some home buyers in Prince George, however the market remains strong, says Gordon Langer of Boardwalk Properties.
“Last year, the lower the interest rate meant a homeowner could get a bigger mortgage,” says Langer. “What they’ve done now, even if the rates are at three per cent, they’re going to stress test around five per cent.”
In other words, bank will approve mortgages based on the home buyer’s ability to pay if the mortgage rate was at five per cent. It doesn’t mean prospective home buyers can’t get a mortgage, however the amount they can qualify for likely will be less.
“For example, last year if you qualified to get a $300,000 mortgage, now you might only qualify for $275,000 or $290,000,” says Langer.
He says a report from Will Dunning of Mortgage Professionals Canada estimates 91 per cent of new mortgage applications will be subject to the new stress test and of those, 18 per cent will fail the stress test.
“There’s some hesitation with new mortgage changes,” says Joe Postnikoff of Boardwalk Properties. “It has maybe caused people to be a little hesitant.”
The charter banks have to apply the stress test rules, however private lending companies don’t so they may see more business because of the changes. In the first three weeks of 2017, 38 residential homes sold in the city. This year there have only been 11.
However, Langer points out that it’s not all bad news as mortgage rates, even at three per cent are pretty good, and the Prince George market still a good one.
“That’s the benefit with Prince George because housing is still pretty affordable,” says Postnikoff. “Even if you were looking at house that was $400,000 and the bank says you can only get approved for $340,000, you’re still in a place where you can afford a house.”
Langer says first time home buyers might have to set their target a little lower.
And Postnikoff has some advice for anyone looking to purchase a home.
“My recommendation is to set yourself up with a bank or a mortgage broker first so you can get an idea of what you’re able to afford,” he says. “You don’t want to find your dream home and then find out you can’t afford it.”
Overall the market outlook for 2018 is good, says Langer.
The average house price in Prince George has increased about eight per cent over the last year. The only area still under the $300,000 mark is Prince George city west where the average price is about $280,000. The average price in the Hart is $320,000 and $378,000 in College Heights.
“For 2018, I think it’s positive,” said Langer. “I think people should buy still. Prince George, at whatever price you get today is still going to be good. Prince George is in the goalposts for people coming out of Vancouver to invest. People take their money out of the city and invest up here.”
Prince George can also expect to see more multi-family units being built as well.
“There’s not a big supply of townhouses and condominiums,” says Langer. “The market’s going to be strong for multi-family.”