Proposed New Mortgage Regulations
Be prepared – Stricter rules around qualifying for a mortgage could be coming this spring.
Canada’s banking regulator OSFI (The Office of the Superintendent of Financial Institutions) proposed three new regulations that could further restrict mortgage lending.
A review is underway. Potential additions come as OSFI is saying risk around loans and borrowing have increased considerably in recent years.
OSFI’s three potential proposals include:
- Loan-to-income (LTI) and debt-to-income (DTI) restrictions
These measures would restrict how much a lender can lend to borrowers whose mortgage, or total debt, exceeds a certain percentage of their gross income.
- Debt service coverage restrictions
This change could further limit the amount that a borrower’s mortgage payment, or other payment obligations can be as a percentage of income.
Most lenders, limit a borrower’s debt obligations to maximum 39 per cent of gross income, or less. Currently, OSFI hasn’t capped this number; Now it might. It may also limit the debt ratio exceptions lenders make to get around its borrowing stress test that required lenders to qualify applicants at 2% above the best rate offered
- Interest rate affordability stress tests
The final proposal could see OSFI adopt more “risk-sensitive” tests of affordability beyond the current Minimum Qualifying Rate (currently 5.25%) used in the existing mortgage stress tests.
OSFI suggested lenders could be asked to implement varying minimum qualifying rates based on different risk characteristics and product types, such as different mortgage terms.
None of the proposed changes will be finalized until after OSFI’s consultation/review period, which is now open until April 14, 2023.
Please call with any questions.
Bob & Team