Qualifying for a mortgage could have stricter rules coming with proposals to limit the number of overstretched borrowers. The proposals from the Office of the Superintendent of Financial Institutions (OFSI) are part of the reviews of the B-20 mortgage underwriting rules happening this year.
Additions to the stress test include:
- Limiting the proportion of mortgages where loans are more 4.5x the borrower’s income
- Limitations on how much debt could take up of an individuals household income
- Limitations on higher-risk products like variable rate mortgages
“Implementation of additions will either happen at an individual loan level, or at the lender level. Depending on the rules, this could allow for the banks and others to better average out mortgages and lead to fewer clients being forced to look at unregulated lenders.”
Proposals could affect 5 to 10% of borrowers, others will no longer qualify, and some could see an increase in their down payments or might only qualify for a smaller mortgage.
“Mortgages with a high loan-to-income ratio (more than 4.5x a household income) jumped to an average of 33.7% of loans 2020, and 40% in early 2022, compared to an average of 23.8% in the 7 years prior.”
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Warm regards, Keith Baker | kpbaker@shaw.ca | 604.723.5363 Jackie Zerbe | jacqueline@totalmortgage.ca | 604.724.6982 TotalMortgage.ca (@TotalMortgage.ca)
Source: Banking regulator launches consultations on mortgage rules, proposes additions | Ian Bickis | The Canadian Press | Jan 12th, 2023