'Pre-approvals out the door': Proposed mortgage rules could make home-buying more challenging
While signs are pointing towards renewed activity for Canada's real estate market, proposals to mortgage lending guidelines may make qualifying much more difficult.
The Office of the Superintendent of Financial Institutions (OSFI), the country's federal banking regulator, released its proposals for the first phase of the B-20 mortgage underwriting rules review in January.
The potential changes and additions include:
- Establishing a loan-to-income threshold could prevent borrowers from qualifying for homes worth more than 4.5 times their income.
- Establishing debt servicing rules for uninsured borrowers already in place with insured and insurable mortgages.
- Enhancing a previously introduced stress test to include more stringent affordability tests for higher-risk products.
The review results from higher risks in borrowing and loans that have increased yearly.
"They all point towards the same result," said Michael Oziel, a mortgage broker with Sherwood Mortgage Group. "They're trying to lower how much mortgage debt Canadians can take out."
But those in the mortgage industry, such as Oziel, are concerned about the adverse effects the proposals could have on Canadian Real Estate.
"My take on it, it's already difficult enough to qualify," Oziel added. "It's going to reduce the overall mortgage that a Canadian can take out even further."
Industry experts say increasing interest rates and record consumer debt concern everyone within the Canadian financial sector.
But according to the Canadian Mortgage Brokers Association (CMBA) of Ontario, the proposals, as they stand, might be going about it the wrong way.
"Pre-approvals would essentially go out the door," said Sadiq Boodoo, CMBA Ontario President. "It's going to become such a laborious task in order for somebody to fit into this really tiny box."
The CMBA is one stakeholder currently taking part in consultations with the federal regulator. Boodoo said it's still working on its suggestions to provide OSFI with feedback.
"We're also advocating to make it easier for first-time home buyers to enter the market," Boodoo said. "Let's give you a 40-year amortization on that first purchase; if you refinance or buy another, now you're subject to the same 30 or 25 years like everybody else, but let's make it more affordable to at least get in once."
The rules would be in addition to the existing regulations around minimum qualifying rates, known as the mortgage stress test.
It forces borrowers to qualify for a mortgage at a 5.25 per cent interest rate, or two percentage points above the contract rate, with the higher of the two being the threshold.
Responses to this first phase of the review are due on April 14.
CTVNews.ca Top Stories
Deaths of 4 people on Sask. farm confirmed as murder-suicide
The deaths of four people on a farm near the Saskatchewan village of Neudorf have been confirmed a murder-suicide.
Grandparent scam: London, Ont., senior beats fraudsters not once, but twice
It was a typical Tuesday for Mabel Beharrell, 84, until she got the call that would turn her world upside down. Her teenaged grandson was in trouble and needed her help.
developing Bus plunges off a bridge in South Africa, killing 45 people. An 8-year-old child is only survivor
A bus carrying worshippers headed to an Easter festival plunged off a bridge on a mountain pass and burst into flames in South Africa on Thursday, killing at least 45 people, authorities said.
Calgary bridges remain closed due to ongoing police incident
Calgary police have shut down a number of bridges into and out of the downtown core as officers deal with a distraught individual.
Why some Christians are angry about Trump's 'God Bless the USA' Bible
Former U.S. President Donald Trump is officially selling a copy of the Bible themed to Lee Greenwood’s famous song, 'God Bless the USA.' But the concept of a Bible covered in the American flag has raised concern among religious circles.
George Washington family secrets revealed by DNA from unmarked 19th century graves
Genetic analysis has shed light on a long-standing mystery surrounding the fates of U.S. President George Washington's younger brother Samuel and his kin.
Sunshine list: These were the Ontario public sector's highest earners in 2023
Ontario released its annual sunshine list Thursday afternoon, noting that the largest year-over-year increases were in hospitals, municipalities, and post-secondary sectors.
Kinew, Poilievre meet at Manitoba legislature, discuss each other's priorities
Premier Wab Kinew and federal Conservative Leader Pierre Poilievre met at the Manitoba legislature Thursday afternoon.
Biden OKs US$60M in aid after Baltimore bridge collapse as governor warns of 'very long road ahead'
Maryland Gov. Wes Moore warned Thursday of a 'very long road ahead' to recover from the loss of Baltimore's Francis Scott Key Bridge as the Biden administration approved US$60 million in immediate federal aid after the deadly collapse.