The country’s federal banking regulator is tightening rules against mortgage stress tests for home buyers with an uninsured mortgage from June 1.
The minimum qualifying rate for uninsured mortgages — home mortgages with a down payment of 20 percent or more — will rise to either the contractual rate plus two percentage points, or 5.25 percent, whichever is higher.
Currently, any buyer whose home down payment is one-fifth of the purchase price or more must show that they can afford mortgage payments if the interest rate was two percentage points higher than what the bank is offering them or five. percent. The annual base rate, published by the Bank of Canada, is 4.79%, whichever is higher.
The Office of the Office of Financial Institutions (OSFI) confirmed the changes in the release on Thursday after it reviewed material on the plan it first proposed in April.
“The rate effective June 1, 2021 will help maintain financial stability in the event of a changing economic environment, while our commitment to renegotiate the qualifying rate at least annually will help maintain confidence in the Canadian financial system.” – Ben Galli, Assistant Superintendent of OSFI. regulation, the message says.
“In a complex and sometimes volatile housing market, the need for reliable mortgage underwriting should not be underestimated.”
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The tougher stress test will make it harder to get a mortgage in the short term, according to James Laird, co-founder of Ratehub.ca and president of mortgage broker CanWise Financial.
“At all income levels, this change reduces the size of the mortgage that a family can qualify for by about five percent,” he said in a statement.
Following the OSFI announcement, Deputy Prime Minister and Finance Minister Chrystia Freeland said in a statement that the new rules would also apply to insured mortgages – mortgages with a down payment of less than 20 percent.
“The federal government will agree with OSFI to set a new minimum qualifying rate for insured mortgages, subject to revision and periodic adjustment, which will be higher than the borrower’s mortgage rate plus 2 percent, or 5.25 percent,” she said. …
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“It is vital that home ownership remains affordable for Canadians. We know we need to take vigorous action on the supply and affordability of housing in Canada. ”
Laird says Canadians, who are currently looking to buy a home, must pre-approve their mortgages by June 1, as OSFI will allow lenders, at their discretion, to cancel the current stress test rate.
The same goes for everyone who has already bought a home and those looking to refinance.
OSFI also said Thursday that it will review and report the qualifying rate at least once a year – every December – well in advance of the spring sales season.
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