Mark David

Some 19 per cent of respondents to a recent Bank of Montreal survey on first-time buyers say they are holding off on purchases due to tighter mortgage rules introduced by federal government exactly one year ago.

These rules and rising interest rates have significantly affected first-time homebuyers across Canada. Still the majority of respondents suggest the reduction of the maximum amortization to 25 years, among other key changes, have not forced them to postpone home buying.

Still, further increases to interest rates may push other first-time homebuyers out of the market, said one mortgage broker, reacting to the survey.

“If the rates continue to increase, and the amortizations periods do not revert, it will continue to affect this buyer class,” says Mortgage Alliance’s Marcel Greaux. “In addition to the increases in rates, a lot of first-time homebuyers are pretty much out of the market.”

The situation may also push first-time homebuyers to focus on specific terms for their mortgages.

“They have been forced to take a fixed term of five years or longer,” explains Andrew Galea of Calum Ross Mortgages.

“Any other alternative, meaning a variable rate or a term of less than five years, has resulted in them qualifying on the mortgage qualifying rate, which is currently 5.14%.”

However, it’s not all bad news. The tighter rules appear to have helped the Canadian housing market achieve a soft landing.

“While Canadian home sales weakened markedly at the time of the mortgage changes a year ago, they have since stabilized and have even partially recovered in recent months,” BMO Capital Markets chief economist Doug Porter said in a statement.

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