The Office of the Superintendent of Financial Institutions has released new mortgage qualification rules that will come into effect on January 1, 2018. Similar to the current rules for insured borrowings, the new rules are meant to protect purchasers and lenders from default in the case where interest rates could rise over time. The new rules apply to NEW borrowings, but not mortgage renewals, so long as the renewal is with the same financial institution as the original borrowing.

Under the new rules, Canadian lenders will have to qualify their mortgage loans using the Bank of Canada’s 5-year benchmark rate instead of the actual rate offered to their clients, or the client’s actual contracted rate plus two percent, whichever rate is higher.

As an example, presume a buyer earning $100,000 annually can borrow at a short-term rate of 2.83% and has a 20% down payment. That buyer could previously afford a $727,000 home. Under the new rules, with a 5-year rate of 4.89%, that same buyer can only afford a new house costing $571,000.

The brokers at Deakin Realty are always available to help analyze how these changes will affect you and your purchasing power, and we have partnerships with the best mortgage brokers at all the big banks who can help arrange your financing under this new regulatory framework. So don’t hesitate to get in touch!