Canada's banking regulator has announced it's final changes to it's mortage underwriting standards. The most wide reaching change announced by OSFI (Office of the Superitendent of Financial Institutions) is the establishment of a new minimum qualifying rate, or "stress test" for borrowers making a down payment of more than 20% of the homes value.
Previously the stress test requirement only applied to insured mortgages (those with down payments less than 20%) and most variable mortagages and terms less than 5 years.
The stress test requirement, which comes into effect January 1, 2018 means a mortgage must qualify at the posted Bank of Canada's 5 year benchmark rate (currently 4.89%) or the best mortgage rate you can find plus 2%, whichever is greater.
This means a family earning $100,000 putting down a 20% down payment on a 3.09% five year fixed rate amortized over 25 years would have qualified for a house worth $706,692. As of 2018 that same family would only qualify for a house worth $559,896 based on a 4.89% stress test.
The new rules do not apply to renewal mortgages as long as the borrowing is with the borrower's existing lender.
Please feel free to give me a call to see how these and the other new rules will affect you,