The 2023 Fall Federal Economic Statement was recently released in the past few weeks. With Canadians facing increasing financial pain through generationally high inflation, which has resulted in the Bank of Canada raising interest rates to 20-year highs; the federal Liberal government has been subjected to mounting political pressure for them to offer some relief. Finding themselves substantially behind in the polls and financially constrained through previous and current overspending, they announced a few programs of interest.
A few things of note
The most noteworthy announcement was that current mortgage holders would no longer have to pass the “stress test” when transferring their existing mortgage over to a new lender. This is a positive change which will allow many home owners the ability to “shop around” for a lower mortgage rate at competing financial institutions.
As your Hamilton mortgage broker, I have witnessed the frustration when clients are unable to take advantage of our lender’s lower rates which causes them to be “handcuffed” to their existing bank. These banks know this and have been quick to “not” pass along any discounts on interest rates at renewal time because they knew that they weren’t going anywhere.
This change will have the effect of allowing a client to qualify on the actual mortgage payment with the new lender rather than them having to qualify for the “stress tested” payment based on using a rate 2% higher than the actual. This change is late in coming, but welcome nonetheless.
With interest rates at historical levels and all signs pointing to a halt to increases, it would be prudent to strongly consider doing away with the stress test altogether, however, that will not likely happen any time soon.
Some other minor news
There were also to be requests made to lenders to closely work with clients that are experiencing hardship with not being able to afford their mortgages at renewal time in light of higher rates.
The caveat to this announcement, known as the “Canadian Mortgage Charter” is that they are suggestions being made to the banks and not binding legislation. Time will tell what parts will be adopted.
Some other changes announced were geared towards incentivizing the building of rental units through GST breaks. This could have a small positive effect by increasing rental unit construction, however, it could also potentially come at the cost of building owner-occupied properties for sale, which are already in short supply. There don’t appear to be any substantial measures for working towards increasing the housing supply for new homes.
An effort is being made to prioritize construction workers for gaining permanent residency in Canada to bolster the workforce required for the increasing demand for workers in the building industry.
In Summary
Overall, the announcement is short on substance in the opinion of this Hamilton Mortgage Broker. Feel free to reach out if you have any additional questions about any of the above information or other common mortgage questions.