New Mortgage Regulations
With the OSFI releasing new mortgage regulations (the latest update to the Residential Mortgage Underwriting Practices and Procedures commonly referred to as B–20 – kind of sounds like a virus!), many homeowners and buyers are wondering what it means for them.
What exactly is B-20?
You might be thinking this is bad news but there is a silver lining…
Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to
be the greater of the ve-year benchmark
rate published by the Bank of Canada or the contractual mortgage rate +2%. Current bench mark sitting at 4.99% as of today. The new regulation will take effect January 1st, 2018.
The Cost of Borrowing
The Bad: These regualtions are aimed to cool the markets which may not be amazing news for sellers.
The Good: With the new federal regulations paired with what the Municipal and Provincial initiatives are aiming for, it is widely expected that the cost of borrowing is to remain low for the foreseeable future. We can now see that regulatory changes are to be the new lever, not excessive rate hikes. Cooler markets will be great for buyers but we still see low inventory fuelling stable home prices.
What if I’m Renewing?
The Bad: If you are switching lenders at renew- al time you will be subject to the new regula- tions.
The Good: So long as you qualify for what you are looking for, the new regulations become moot and you may be able to save money in the long term with a more competitive offering.
Your Buying Power
The Bad: It is expected that purchasers affected by the rule change will see their maximum buying power slashed by upwards of 18%.
The Good: Keep in mind that this is a reflection of the maximum… buyers shouldn’t be aiming for the absolute most they qualify for to begin with and the good news is that most don’t! In fact, it’s amazing how much some banks will approve buyers for, and our advice often times is to not go for the maximum.
Did You Say Loophole?
The Bad: Federally regulated lenders are subject to the new regulations.
The Good: Credit Unions are conspicuously absent from this list. At present they have not given any indication that they plan to follow these rules of their own volition. The bottom line is that there are a number of options still available for borrowers.
Go here to see who is de ned as a ederally regulated lender:
What if I’m putting less than 20% down?
The Good: There is no bad news! Buyers who were putting less than 20% down were already having to pass the ‘stress’ test.
The Better: This might even level the playing field a bit for buyers who are putting less than 20% down.
Do you want to talk to a professional that can give you neutral advice on your current and future mortgages?
Angie has access to over 30 lenders and can help you evaluate your financing options and strategies.
Capital Home Lending Mortgage Agent License: M13001523