Today let’s talk about the regulation changes proposed by the Office Of The Superintendent better known as OFSI. The announcement came late last week that they have opened discussion on a proposal to change the stress test for uninsured mortgages. What this means is, if your putting more than 20% down on a purchase or if you are looking to refinance your home, this could affect you should they decide to pass this latest change.
Currently all mortgages are stress tested at contract rate plus 2% OR Bank Of Canada rate which is currently sitting at 4.79%. As of now, they intend to keep all high ratio mortgages (those with less than 20%) as is. For those with 20% down payment or more or those looking to refinance your home this policy changes means you can expect about a 5% reduction in your borrowing power. In the grand scheme of things this isn’t much but to those that are looking to refinance their home 5% Reduction in borrowing power may change their ability to refinance if the numbers are already tight.
It’s also important to note that Back in 2018 when the stress test was first announced it actually reduced buying power by about 35% so this 5% reduction is minimal compared…
So In all honesty who are they kidding?
I don’t believe that this proposed change in policy is going to slow down runaway housing prices. It won’t stop multiple offers and the crazy frenzy we are seeing in today’s housing market. This proposed change in policy makes little sense. If buyers decide to put less than 20% downpayment they then wont be affected by this policy at all. Now, who is going to benefit from this policy change? (shrug) could it possibly be CMHC and the other insurers since this may increase the insured mortgage market?….just a thought
So in short, things to remember
Only conventional mortgages will be affected… so those with 20% down payment or those looking to refinance their homes
You don’t have to put 20% down payment… there seems to still be confusion about this. It’s not just fthb that can put 5% down payment. Go back and watch our video about that.
Credit union, mortgage finance companies that are provincially regulated May not be affected by this change in policy since this is a federal rule
Discussions about this new proposal have started and a final amendment to the policy will be announced on May 24 with an enforcement date on June 1st
This doesn’t leave us with much time between decision and enforcement.
There is no discussion on what will happen to those approvals already in place and if they will be affected… we assume those approvals will be grandfathered however we don’t know yet
So if you have questions or want to discuss you options prior to these possible changes connect with us.
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Until next time, have a fantastic week