Obtaining a mortgage in Canada has become increasingly difficult for homeowners as rising interest rates and the thresholds that banks base their approvals on have steadily increased.
The government of Canada has recently implemented more stringent regulations forcing chartered banks to use a higher interest rate as a stress-test for prospective mortgage borrowers. This rate just climbed another 20 basis points and now sits at 5.34 percent. This is the fifth increase since May of last year. A borrower who used to qualify for a $500,000 home purchase might only qualify for $400,000 under the new guidelines. This increase has left many would be homeowners, and even current homeowners, looking to purchase or renew with reduced options.
These increases will have the effect of driving more people into the rental market. Through simple supply and demand fundamentals, we can expect rental rates to rise. For those investors with good credit and lots of capital, the future looks very promising to be a landlord.
h/t: http://www.cbc.ca/