The new tighter mortgage rules not only mean that we’ll have to pay-down our mortgages faster, but that 9% of potential home buyers will be kept out of the market completely. Most Canadians are financially responsible and can support the idea of paying down our mortgages faster, even if it’s a practice enforced by the Department of Finance. Although higher mortgage payments might cause some short term pain, the long term gain of paying less interest and owning our homes sooner will be worth the effort.
The knock-on effect of keeping more Canadians beholden to their landlords however is not an acceptable side effect. Escalating housing prices have not only increased the price of purchasing a home, they’ve also increased the rents landlords need to charge to return an acceptable rate of return on their investment. Prior to the mortgage rule changes many Canadians found that they could own their own home for the same cost as renting. By increasing the minimum mortgage payments the rent vs buy equation has shifted towards renting.
What’s worse is that as landlords increase their rents to keep up with their mortgages the tenants will find themselves once again in a position where owning makes good financial sense. The only difference is that now they won’t qualify for a mortgage. We all have to live somewhere and the new tighter mortgage rules will mean that many Canadians will be forced to rent even though they could own for the same monthly payment.