Old news, but important news

It is now going to get harder to buy your first home. The government has recently decided that lending rules must get tighter, so that when, not if, interest rates go up, we will not have a real estate crash similar to something that occurred in the US recently. I think it's a solid proactive move that will help the Canadian economy in the future.

The new qualifications are based on a 5 year fixed term mortgage. In the past, the lending rules were more lenient in that a person would be able to qualify for a mortgage with something less than the 5 year fixed term standard. When interest rates have been at a historic low, this is not an issue. This only becomes an issue when interest rates begin to go up, and that is the only way for them to go.

Some people in the real estate business may not like this news. It means that there might be a few less buyers out there for some properties. The extra buyers are not worth the risk that this presents to our economy. First, there is currently an inventory shortage in many cities across Canada, leading to historically high home prices as there are more buyers than sellers. Thus, I don't expect that this rule change will alter home prices all that much. This can be good news. It means that homes remain affordable.

The second issue is the fact that those who will face trouble when interest rates go up will be fewer in numbers. This means less people liquidating their properties in a mad rush. This will keep home prices stable when interest rates do eventually go up.