Even with the new $4,000 Land Transfer Tax rebate for first-time home buyers, up from $2,000 and in effect January 1, 2017, first time home buyers might delay their purchases due to the new federal mortgage rules.
“More rebate means more money in the pockets of first-time buyers which benefits both home owners and the province,” said the CEO of the Ontario Real Estate Association, Time Hudak. “The money that home buyers get back either ends up going towards their mortgage or more often they spend it on furniture, appliances, renovations.”
The new rules were announced in October, and they require home buyers to qualify for a mortgage at a higher interest rate if they have a down payment lower than 20%.
According to the Ontario Home Ownership Index, which is a semi-annual study commissioned by the Ontario Real Estate Association, 45% of first time home buyers say they will need to keep saving in order to have a 20% down payment. Thirty-four per cent will need to look for a less expensive home, while 22% say they will look in a different city.
“Our survey indicates that the new stress test will have a negative impact on first time buyers’ ability to buy a home,” said Hudak. “It’s important to remember who’s being affected by measures that curb housing demand – a young family looking for more space, a twenty-something trying to get out of his parents’ basement. Just when they’re about to make the leap into home ownership, things get a little less affordable.