The Office of the Superintendent of Financial Institutions (OSFI) has proposed a change to the mortgage qualification guidelines.
While it is a proposal at this stage (official announcement will be May 24 with a June 1 effective date, if approved,) based on historic announcements, Outline Financial anticipates this change will be approved and people should prepare accordingly.
Currently, for conventional mortgages (more on that later), you qualify for your mortgage based on a “Stress Test” rate vs. your actual mortgage rate. The “Stress Test” rate is calculated as the greater of your actual mortgage rate +2.00% OR the Benchmark Rate (which is currently 4.79%). OSFI wants to increase the Benchmark Rate to 5.25% effective June 1 (will be called the “floor rate” going forward).
Who will this impact?
This change is aimed at conventional mortgages. What does that mean? For purchases, a conventional mortgage is (1) any purchase of $1,000,000+ OR (2) any purchase with a 20%+ down payment. The change will also impact anyone looking to refinance their existing home.
Who will this NOT impact?
For now, this change will not impact those buying for less than $1,000,000 with less than a 20% down payment (High Ratio buyers). As this is a federally imposed change, this may not impact provincially regulated lenders (i.e., credit unions). As a mortgage brokerage, we have access to over 20 banks, credit unions, and mono-line lenders and always look for the best fit solution depending on a clients’ goals, priorities, and circumstances.
What can you do to prepare?
Discuss with your mortgage broker and have them run the numbers specific to your circumstance to determine if/how much this could impact you. For those that are not buying up to their absolute max qualification amount, they may find this potential change has no impact.
Read the full report from Outline Financial below;