Due to the recession, qualified buyers are able to purchase their home for less per month!

The last 12 months have been a challenge in the Canadian Mortgage Industry. In Alberta and across the country we have seen an interesting phenomenon occur made up of two components.

Lower Interest Rates
Interest Rates have plummeted and thus increasing housing affordability for first time home buyers and others. In Alberta where property values are some of the highest in the country, affordability is a big factor in keeping the residential real estate market active.

Lower Home Prices
Home prices in many parts of Alberta are about 10% lower now then they were a year ago. While this is not true for all homes (some have lost little value while others have lost upwards of 40% of their value — and this varies by community) it is pretty accurate for most homes. Lower home prices combined with lower interest rates has spurred a lot of activity in the lower to medium price ranges. Qualified first time home buyers who felt home ownership was too expensive in 2006 and 2007 are now able to enter the home ownership market at a notable discount in both home price and monthly payment.

Tighter Borrowing Criteria
While the amount of income required to qualify for a mortgage has decreased due to lower rates, fewer borrowers are qualifying. In 2008 the Government of Canada changed the rules with respect to high ratio insured mortgages mandating a minimum beacon score requirement of 600. In addition to the changing rules, many lenders, as well as CMHC and the other mortgage insurers, have been more selective of what negative credit items they will allow on an application while still approving it.

The combination of these three items has had a unique effect in that at the same time it removed a certain market segment (primarly those with poorer credit) it has opened up the doors to many qualified borrowers who were squeezed out of the market in 2006 and 2007 when the cost of home ownership was too high.