IMPENDING MORTGAGE RULE CHANGES
OSFI (Office of the Superintendent of Financial Institutions) has propose a change to the uninsured stress test rate. OSFI regulates and supervises more than 400 federally regulated financial institutions (80% of all mortgage lenders). They do not watch over provincial credit unions and private lenders. OSFI reports to parliament through the Minister of Finance and regulates the conventional space.
Proposed change - Effective June 1st the qualifying rate for conventional (uninsured) mortgages will be based on a stress test of 5.25%
Note that Department of Finance regulates insured mortgages who currently have a stress test rate of 4.79%
Timeline - On May 7th the public was invited to provide feedback to the change. By May 24th the feedback will be taken into consideration and the final amendments will be made. As of June 1st the changes will take effect.
What does this mean to clients?
• If you have a signed accepted offer dated prior to June 1, 2021, your mortgage broker can submit and qualify using 4.79% It will not matter when the closing date is or if its insured or uninsured.
• If you have a signed accepted offer dated June 1st or later, your mortgage broker will be qualifying you using 5.25% on conventional files (20% + down payment) and 4.79% on insured files (***this may change) We are hearing whispers that the insured files will be changing to the 5.25% stress test as well but have had no confirmation of it as of yet.
When looking at the numbers and running the scenarios, there will be approximately a 5% decline in buying power.
So for instance: Teacher & research assistant have a combined income of $143K
Today: 4.79% conventional @ 30 yr AM – would qualify for $735K
June 1: 5.25% conventional @ 30 yr AM – would qualify for $700K
If you have any questions please feel free to reach out to me.