'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
Stormy Daniels describes meeting Trump during occasionally graphic testimony in hush money trial
Stormy Daniels took the witness stand Tuesday at Donald Trump's hush money trial, describing for jurors a sexual encounter the porn actor says she had with him in 2006 that resulted in her being paid off to keep silent during the presidential race 10 years later.
Indian envoy warns of 'big red line,' days after charges laid in Nijjar case
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
Susan Buckner, who played spirited cheerleader Patty Simcox in 'Grease,' dead at 72
Susan Buckner, best known for playing peppy Rydell High School cheerleader Patty Simcox in the 1978 classic movie musical 'Grease,' has died. She was 72.
Former homicide detective explains how police will investigate shooting outside Drake's Bridle Path mansion
Footage from dozens of security cameras in the area of Drake’s Bridle Path mansion could be the key to identifying the suspect responsible for shooting and seriously injuring a security guard outside the rapper’s sprawling home early Tuesday morning, a former Toronto homicide detective says.
Jeremy Skibicki has 'uphill battle' to prove he's not criminally responsible in Winnipeg killings: legal analysts
Accused killer Jeremy Skibicki could have a challenging time convincing a judge that he is not criminally responsible for the deaths of four Indigenous women, a legal analyst says.
Alcohol believed to be a factor in boating incident after 2 men die: N.S. RCMP
Two Nova Scotia men are dead after a boat they were travelling in sank in the Annapolis River in Granville Centre, N.S., on Monday.
Northern Ont. woman makes 'eggstraordinary' find
A chicken farmer near Mattawa made an 'eggstraordinary' find Friday morning when she discovered one of her hens laid an egg close to three times the size of an average large chicken egg.
Bye-bye bag fee: Calgary repeals single-use bylaw
A Calgary bylaw requiring businesses to charge a minimum bag fee and only provide single-use items when requested has officially been tossed.
CFL suspends Argos QB Chad Kelly at least nine games following investigation
The CFL suspended Toronto Argonauts quarterback Chad Kelly for at least nine regular-season games Tuesday following its investigation into a lawsuit filed by a former strength-and-conditioning coach against both the player and club.