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Shock value

Many Canadian home buyers are in for a shock. And that’s aside from the price.

It’s because so many aren’t aware of the new mortgage qualification guidelines that came into effect in January, a new poll suggests.

The Royal Bank of Canada survey indicates a rather high 61 per cent of Canadians don’t even know about the new stress tests for uninsured mortgages put into place by the Office of the Superintendent of Financial Institutions, the commercial bank regulator.

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The annual RBC poll of 2,000 Canadians was done by Ipsos in January, when the new rules were taking hold.

Nonetheless, the survey results are interesting in that they show just how many people still didn’t know about the stress tests despite the fact that policy makers, particularly in Ontario and British Columbia, and observers the world over were publicly fretting about Canada’s frothy housing markets.

They’re also interesting in that they show home-buying intentions at their highest in eight years despite the new guidelines and rising interest rates.

That, said Nicole Wells, RBC vice-president of home equity financing, is because so many people still want a house. And in some areas, particularly Toronto and Vancouver, the rental market isn’t big enough and the costs are still high, she added in an interview.

Indeed, 32 per cent of those surveyed plan to buy a property within the next two years, a jump of seven percentage points from last year. Among them are millennials who plan to buy “as employment anxiety eases,” the bank said.

“People still see a house as a good investment,” Ms. Wells said, adding that, given the rules and the climate of today, there has never been a better time to get the advice you need as you look down the road.

Certainly some appear to be doing just that. Though many don’t know about the new rules, others do, and they’re adjusting their expectations accordingly, Ms. Wells said.

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Of the 39 per cent who do know about the stress tests, more than half of them suggested the new rules are affecting their intentions: 25 per cent are looking at higher down payments; 19 per cent at delaying; and 18 per cent at either buying a cheaper property or one in a different area.

The new rules mean heightened scrutiny for mortgages with a down payment of more than 20 per cent, those that don’t need insurance.

New uninsured mortgages are now stress-tested at the greater of the Bank of Canada’s five-year benchmark rate, or what you’ve negotiated plus two percentage points.

The rise in interest rates is also playing a role, with 61 per cent “very or somewhat concerned” about the increases, well up from the level of last year. At the same time, 35 per cent are considering buying sooner because rates are still low, and 32 per cent because rates are expected to continue climbing.

As for financing, 35 per cent are or will be getting help from their families, and 36 per cent are going it alone with a dedicated savings account.

The bank didn’t discuss the shock value of not knowing about the new mortgage rules, which are among the many measures provincially and at the federal level aimed at preventing a burst bubble amid troublingly high household debt levels.

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But its breakdown did show differences among the regions. The folks in Manitoba and Saskatchewan are most aware of the rules, at 53 per cent, and those in Quebec the least aware, at just 15 per cent.

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A scene I’d love to see

“What new mortgage rules? You mean we can’t put it on Visa?”

Photo illustration

Stocks sink on trade fears

“It would appear that gloves are off in relation to the trade war between the two largest economies in the world

— David Madden, CMC Markets

Global markets steadied after an early drop Wednesday as China fired back in a trade war with the U.S.

“The trade war between China and the U.S. remains front and centre of the collective market midset this morning, with the tit-for-tat action ramping up in the wake of announcements from both sides,” said IG market analyst Joshua Mahony.

“While global markets have been feeling the strain, the announcement of exactly where China was going to target its $50-billion worth of tariffs has now pushed the focus onto specific markets, with the targeted response likely to drive losses across agriculture, chemicals, autos, aircrafts, and more,” he added.

Here's how North America looks at this point:

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“It would appear that gloves are off in relation to the trade war between the two largest economies in the world,” said CMC Markets analyst David Madden.

“Dealers will be half expecting a retaliation from President Trump, and the exodus from equities is likely to continue.”

The turmoil is spreading well beyond stocks.

“It comes as no surprise that we are seeing traders flock to safe havens in response, with gold and the yen both sharply higher throughout the morning’s trade,” said IG’s Mr. Mahony.

The Canadian dollar, in turn, rose sharply to 78.3 US cents, and now stands at about the 78-cent mark.

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Toronto home prices start to rebound

House prices in the Toronto area continued to show signs of stabilizing in March, fuelling predictions the city will see stronger growth in the second half of 2018, The Globe and Mail’s Janet McFarland reports.

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The Toronto Real Estate Board said the average home in the Greater Toronto Area sold for $784,558 in March, down 14 per cent from March a year ago, prior to a steep market drop that began in May. However, the average sales price in March was up 2.2 per cent compared to February this year, buoyed by modest growth in detached home prices.

TREB said 7,228 homes sold in March, a drop of 40 per cent from 11,954 sales in the same month last year. Detached home sales fell by 46 per cent, while condo sales dropped by 33 per cent.

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