Mortgage Underwriting Changes Could Harm Homebuyers

iStock_000004598824SmallOn October 17, the federal Office of the Superintendent of Financial Institutions (OSFI) announced new restrictions on uninsured mortgages. The changes affect homebuyers and federally-regulated financial institutions.

Effective January 1, 2018, all uninsured mortgages will require a qualifying stress test. A homebuyers with a down-payment of more than 20 per cent will have to qualify at the higher of either the five-year benchmark rate, published by the Bank of Canada, or the contractual mortgage rate plus two per cent. This change follows additional restrictions, implemented in October 2016, which required all insured borrowers to also qualify at the five-year benchmark rate.

BCREA’s concerned this change will negatively impact housing affordability by placing home ownership out of reach in some markets. Our economic analysis has shown that consumers’ purchasing power could be reduced by up to 20 per cent as a result of these changes. Since the new regulations impact a large pool of mortgages, the impact could be significant. 

In August, BCREA submitted a response to OSFI recommending that the government step away from making these changes. Though the government has chosen to proceed, BCREA will continue to advocate for consumers’ rights to ensure appropriate housing options are affordable and accessible.

Read BCREA’s full submission to OSFI here.

See OSFI’s news release here.

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