'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
Health Canada to change sperm donor screening rules for men who have sex with men
Health Canada will change its longstanding policy restricting gay and bisexual men from donating to sperm banks in Canada, CTV News has learned. The federal health agency has adopted a revised directive removing the ban on gay, bisexual and other men who have sex with men, effective May 8.
American millionaire Jonathan Lehrer denied bail after being charged with killing Canadian couple
American millionaire Jonathan Lehrer, one of two men charged in the killings of a Canadian couple in Dominica, has been denied bail.
LeBlanc says he plans to run in next election, under Trudeau's leadership
Cabinet minister Dominic LeBlanc says he plans to run in the next election as a candidate under Prime Minister Justin Trudeau's leadership, amid questions about his rumoured interest in succeeding his longtime friend for the top job.
U.S. vetoes a widely supported UN resolution backing full membership for Palestine
The United States has vetoed a widely backed UN resolution that would have paved the way for full United Nations membership for the state of Palestine.
Sports columnist apologizes for 'oafish' comments directed at Caitlin Clark. The controversy isn’t over
A male columnist has apologized for a cringeworthy moment during former University of Iowa superstar and college basketball’s highest scorer Caitlin Clark’s first news conference as an Indiana Fever player.
Bayer recalls hydraSense baby product over 'potential contamination'
Bayer announced Thursday it is recalling two lots of its hydraSense Baby Nasal Care Easydose due to a potential contamination.
N.L. gardening store revives 19th century seed-packing machine
Technology from the 19th century has been brought out of retirement at a Newfoundland gardening store, as staff look for all the help they can get to fill orders during a busy season.
Cat found on Toronto Pearson airport runway 3 days after going missing
Kevin the cat has been reunited with his family after enduring a harrowing three-day ordeal while lost at Toronto Pearson International Airport earlier this week.
Grandparent scam suspects had ties to Italian organized crime, police allege
A group of suspects that allegedly defrauded seniors across Ontario and other parts of Canada using a so-called emergency grandparent scam appear to have ties to 'Italian traditional organized crime,' according to an investigator involved in the OPP-led probe.