Who is responsible for all of these mortgage rule changes? The Office of the Superintendent of Financial Institutions (OFSI) is an independent agency of the Government of Canada reporting to the Minister of Finance created “to contribute to public confidence in the Canadian financial system”. Wikipedia
This time they are proposing to target Conventional Mortgages (20% or more down payment) with a new set of guidelines.
These proposed changes are to include an additional 2% added to the qualifying rate. This will impact a larger group of people and may well lead more people into less favourable housing options. Make sure, more than ever, that you are getting the best advice from a knowledgeable Mortgage Professional
Here’s a brief history of some of those key mortgage rule changes:
- January 1, 2017: OSFI imposed onerous capital requirements on default insurers, thus disadvantaging many bank competitors (and consumers) by jacking up rates substantially on low-ratio insured mortgages.
- November 30, 2016: New stress test regulations were extended to include insured mortgages with 20% equity or more. It also banned certain mortgage types from being insured, including refinances, extended amortizations and single-unit rentals.
- October 17, 2016: The federal government introduced a stress test to be used in approving all high-ratio insured mortgages with terms of five years or more. It required such borrowers to prove they can handle payments at the Bank of Canada’s “benchmark” rate (currently 4.64%).
- February, 2016: The Department of Finance announced it was increasing the minimum down payment from 5% to 10% on the portion of a home’s price that’s above $500,000.
- November, 2014: OSFI releases its B-21 guidelines, which set out insurer restrictions on everything from debt-ratio calculations and self-employment evaluation to borrowed down payments and cash-back mortgages.
- July 9, 2012: The government reduced the maximum amortization period to 25 years for high-ratio insured mortgages, limited the gross debt service and total debt service ratios permitted to 39% and 44%, respectively, banned mortgage insurance on properties over $1 million and implemented a maximum 80% LTV for refinances.
- March 18, 2011: Regulators introduced a 30-year maximum amortization on insured mortgages over 80% LTV, an 85% loan-to-value limit on insured refinances and eliminated government insurance on secured lines of credit (e.g., HELOCs).
- April 19, 2010: The government introduced stress testing for insured mortgages using the Bank of Canada’s 5-year posted rate. Other key changes included a 90% LTV max. on refinances (down from 95%), and an 80% LTV maximum for rental financing.
- October 15, 2008: The first mortgage rule changes announced by the government eliminated 40-year amortizations (dropping them to 35), raised the minimum insured credit score, added a new maximum total debt service ratio of 45% and additional loan documentation standards.
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