Virus may cause “paralysis” in housing market
March 30, 2020
While some mortgage brokers and real estate agents say the effects of the COVID-19 pandemic could spur housing sales due to lower interest rates, the B.C. Real Estate Association (BCREA) warns there will be a sharp downturn at least during the first half of 2020.
The Canadian government has postponed changes to the mortgage stress test, which will negate some of the benefits of lower mortgage rates, the BCREA noted.
The qualifying rate for insured mortgages was set to change from the 5-year posted mortgage rate to the average 5-year fixed rate plus 2 per cent on April 6, with the stress test for uninsured mortgages to follow suit.
By postponing that change, the government will still require borrowers to qualify at a 5-year posted rate of 5.19 per cent, despite the actual average contract rate falling to near historical lows in the sub-3 per cent range, the BCREA noted.
Also, “an almost unprecedented paralysis of economic and social activity” will be reflected in the housing market, the BCREA cautioned, until the coronavirus threat has ended.