'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
Pedestrian, baby injured after stroller struck and dragged by vehicle in Squamish, B.C.
Police say a baby and a pedestrian suffered non-life-threatening injuries after a vehicle struck a baby stroller and dragged it for two blocks before stopping in Squamish, B.C.
Demonstrators kicked out of Ontario legislature for disruption after failed keffiyeh vote
A group of demonstrators were kicked out of the legislature after a second NDP motion calling for unanimous consent to reverse a ban on the keffiyeh failed to pass.
Tom Mulcair: Park littered with trash after 'pilot project' is perfect symbol of Trudeau governance
Former NDP leader Tom Mulcair says that what's happening now in a trash-littered federal park in Quebec is a perfect metaphor for how the Trudeau government runs things.
RCMP uncovers alleged plot by 2 Montreal men to illegally sell drones, equipment to Libya
The RCMP says it has uncovered a plot by two men in Montreal to sell Chinese drones and military equipment to Libya illegally.
Government agrees to US$138.7M settlement over FBI's botching of Larry Nassar assault allegations
The U.S. Justice Department announced a US$138.7 million settlement Tuesday with more than 100 people who accused the FBI of grossly mishandling allegations of sexual assault against Larry Nassar in 2015 and 2016, a critical time gap that allowed the sports doctor to continue to prey on victims before his arrest.
Man wanted in connection with deadly shooting in Toronto tops list of most wanted fugitives in Canada
A 35-year-old man wanted in connection with the murder of Toronto resident 29-year-old Sharmar Powell-Flowers nine months ago has topped the list of the BOLO program’s 25 most wanted fugitives across Canada, police announced Tuesday.
Doctors ask Liberal government to reconsider capital gains tax change
The Canadian Medical Association is asking the federal government to reconsider its proposed changes to capital gains taxation, arguing it will affect doctors' retirement savings.
Pro-Palestinian protests roiling U.S. colleges escalate with arrests, new encampments and closures
The student protests of Israel's war with Hamas that have been creating friction at U.S. universities escalated Tuesday as new encampments sprouted and some colleges encouraged students to stay home and learn online, after dozens of arrests across the country.
Tabloid publisher says he pledged to be Trump campaign's 'eyes and ears' during 2016 race
A veteran tabloid publisher testified Tuesday that he pledged to be Donald Trump 's 'eyes and ears' during his 2016 presidential campaign, recounting how he promised the then-candidate that he would help suppress stories that had the potential to harm the Republican's election bid.