marc falardeau\/Flickr<\/a><\/em><\/p>\nMore Canadian banks are trimming mortgage rates following RBC\u2019s move last week to hack 15 basis points off its five-year fixed rate.<\/p>\n
It was likely welcome news for homebuyers in Toronto, one of Canada\u2019s priciest markets with an average home price of $750,180, according to the local real estate board.<\/p>\n
But could these discounted rates add some fuel to activity in the market?<\/p>\n\n
\u201cIs this drop of 15 basis points\u2026 going to make a difference and jump-start the market once again? No, it\u2019s definitely not,\u201d says Shawn Zigelstein, a GTA-based real estate agent with Royal LePage Your Community Realty.<\/p>\n
Such a decline would only save a borrower $40 a month on a $500,000 mortgage, Zigelstein estimates, while around \u201ca couple thousand\u201d would be shaved off the qualifying rate. \u201cIf you\u2019re dropping 15 basis points at the end of the day, really you can afford four extra Starbucks at the end of the month,\u201d says Zigelstein.<\/p>\n
However, if the recent cuts are the sign of a future trend, the impact could be meaningful.<\/p>\n
\u201cIf we start to see another potential drop, and then another potential drop could that then make things a little bit more attractive for the buyers out there that have been sitting on the sidelines recently? The answer probably is yes if you start to see a pattern,\u201d Zigelstein adds.<\/p>\n
Zigelstein\u2019s remarks echo an earlier report from Capital Economics<\/a>. After the initial RBC cut, Capital Economics said rates would \u201cneed to fall much further\u201d to help Toronto homebuyers.<\/p>\nIn terms of improving Toronto ownership housing affordability, Zigelstein says that removing, or tweaking, mortgage stress testing would be more effective.<\/p>\n
Federally regulated financial institutions are required to test mortgage applicants\u2019 finances to see if they could afford monthly mortgage payments that match either the Bank of Canada\u2019s five-year benchmark rate (considerably higher than current mortgages) or are 2 percentage points above the rate they are applying for \u2014 whichever of the two is greater.<\/p>\n
\u201cI\u2019d love to see that stress test disappear or be adjusted in some way or another,\u201d Zigelstein.<\/p>\n
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