Stricter mortgage rules could be in place by January

THINK OUTSIDE THE BOX:  Client buying power may drop 20% in the coming months with proposed new Government rule changes.  That’s HUGE!

Just like CMHC insured Borrowers now have to qualify at the Bank Qualifying Rate (currently at 4.84%), despite still being able to access 5 year fixed rates at 2.94%, non-CMHC mortgage Borrowers will likely need to qualify under similar parameters very soon.  Borrowers with 20% plus down payment who qualify for, say, a $500K mortgage today will qualify for approximately $420K if the proposed rule changes are implemented.  For many Buyers, that may mean having to change their expectations on the type of property being considered for purchase.

Arguably this rule change is good for the protection of the overall housing market.  However, as an example, for the savvy Buyer looking at purchasing a slightly larger home with a basement to rent, this proposed change could be the difference between purchasing the home with a mortgage-helper suite, and being forced to consider purchasing a condominium instead.  Another example would be the Self-Employed business person who writes off so many expenses that they need to push their debt-servicing ratios to the maximum to qualify for the home they know they can afford.

Anyone looking to purchase a new home in the coming months may want to consider buying sooner than later.  Otherwise, they may just have to settle for less.

By the end of October we should have a clear idea of proposed changes to mortgage lending regulations with updated B-20 rules implemented within two to three months.

Speaking at an event in Toronto, OSFI superintendent Jeremy Rudin said Tuesday that much of what will become the updated regulations will be what the regulator set out in July which includes a stress test for all uninsured mortgages.

He told the Economic Club of Canada audience that the Office of the Superintendent of Financial Institutions is concerned about the high levels of consumer debt and high real estate prices in some markets.

“We are not waiting to see those risks crystallize in rising arrears and defaults before we act,” Mr Rudin stated.

The superintendent says that it has never been more important for mortgage lending underwriting criteria to be strong and that the system needs a “certain integrity.”

Mr Rudin said that although there is a risk of more borrowers using unregulated lenders for mortgages that did not preclude OSFI from taking necessary steps within its mandate.

Steve Randall       Real Estate Professional        04 Oct 2017

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.