If you’re in the market for a mortgage over the next several months, you’ll want to read on.
Several new mortgage changes are coming down the pipeline that could affect your ability to qualify for a loan. Below we cover these changes and how they may impact you.
A Stricter Stress Test (Potential impact: medium for uninsured mortgage borrowers)
Last month, Canada’s banking regulator proposed changes that will tighten the stress test for uninsured mortgages (those with a down payment of 20% or more).
The Office of the Superintendent of Financial Institutions unveiled its proposal that would see the current qualifying rate rise from 4.79% today to 5.25% starting June 1. OSFI said it would also “revisit the calibration of the qualifying rate at least once a year to ensure it remains appropriate for the risks in the environment.”
Experts calculate that the tightening will result in a reduction in purchasing power of about 4%. In other words, if you can qualify for a $500,000 mortgage today, after June 1 that will be reduced to $479,000.
Most uninsured borrowers who are well-qualified shouldn’t have a problem meeting the new qualification criteria, but if you’re currently near the limit of your borrowing capacity, you’ll want to run the numbers with me to ensure you can still qualify.
Vacancy Tax for Foreign Buyers (Potential impact: none for Canadian residents)
Despite calls for the federal government to rein in house price growth, Finance Minister Chrystia Freeland’s first budget was absent of any significant measures aimed at cooling the housing market.
More Rule Changes to Come?
It’s widely expected that the Department of Finance will eventually announce a tightening of the insured stress test to bring it more in line with the proposed changed for the uninsured test. This would apply to those obtaining a mortgage with a down payment of less than 20%.
There’s been no confirmation as of yet, however when OSFI released its revised stress test proposal the Minister of Finance said this: “We will continue to monitor housing market conditions across the country. To inform potential steps the government may take, we will closely examine the results of the consultation announced by the Superintendent of Financial Institutions.”
Do you have a renewal coming up or are you considering a refinance? Are you concerned about the potential impacts of the stress test changes?
The key is having all of this new information in hand before embarking on the process, and I’d be happy to review the changes with you.