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> as the gov't is trying to slow down the real estate market This is not the reason for mortgage stress test, just one of its effects. The main reason for the
by smnrchrds 9y ago
> as the gov't is trying to slow down the real estate market
This is not the reason for mortgage stress test, just one of its effects. The main reason for the regulation is to avoid a tsunami of bankruptcies when interest rates eventually increase.
- encoderer 9y agoThese are not fixed rate loans?
- winthrowe 9y agoYou can't really get a rate fixed over the entire amortization period in Canada, our 'fixed rate' mortgages are a 5 year lockin typically.
- kylemuir 9y agoWhen those fixed rates end and they have to refix a ton of overleveraged people will force mortgagee sales. In Auckland there's been talk of that for at least 5-6 years. For example, people I personally know only earn $80-90k/yr and yet own a $500k house (absolute entry level livable house in Auckland). They also got in under our old rules which meant they only needed 5% deposit instead of the 20% required now. They're only being propped up by their record low interest rates. If those interest rates went up 2-3% they'd be in serious trouble. EDIT: for more context the average fixed period for any home loan in NZ is roughly 2-3 yrs. The term is a 30 year term typically.
- encoderer 9y agoIn USA it’s common for loans to be fixed rate for life of loan.