May 24, 2010
The new mortgage rules introduced in the past month force mortgage applicants to meet more stringent requirements. Applicants are now required to qualify based on the 5-year fixed rate, which now sits at 6.1%, even if their actual payments will be lower because they take a variable rate.
And while it’s a step in the right direction to curb the housing bubble, it has one major issue. If you already hold a mortgage with a bank that is coming up for renewal, you might not have the common luxury of shopping around for the best rate. If you stay with your bank and simply renew, you don’t have to qualify under the new rules. But if you switch, you betcha you’re going to have to!
So your bank has you right where they want you. You can’t leave! A mortgage broker with Mortgage Monsters, Vince Gaetano, said:
“It’s not all of them, but a majority of first-time buyers with just 5% down or less won’t be able to qualify if they go to another bank” Financial Post
But, I guess it’s hard to say what a better alternative would be. These rules were instituted to curb a housing bubble that needed to be stopped. And what would you have the government do? Make all renewals also subject to the new rules and kick people out of their homes?
Admittedly, it’s a sticky situation and the banks are benefiting. But there’s not much that can be done.